Archive for November 28th, 2007

Criticising regulators is easy

November 28, 2007

ET edit page responds to V.Leeladhar’s speech which I coveredyesterday. It criticises RBI saying RBI has gone back to the 1970’s. RBI allowed Banks to set up ATMs without any permissions but now requires them to do so. It also says authorisations are similar to licences; word changes doesn’t matter.

ET misses the stronger point- despite so many licences being given (in ET’s language), why haven’t banks utilised the licences and opened up branches? Liberalisation doesn’t mean a straight path as usually advocated. There are lots of learnings on the way and the regulators need to change as they move along the path.

The criticism for 1970’s policy is valid but if RBI did not push banks in opening up branches in semi-urban/ rural centres, I am sure most  part of India’s rural population would be unbanked. Still large numbers are excluded but atleast some inclusion has happened. There are many a places in India where you find a SBI but to imagine a private and foreign bank is a far fetched idea. The Private Banks only picked up activity in rural sector when scholars like CK Prahlad said money could be made from bottom of pyramid as well.

The idea is not to criticise private banks as most are answerable to shareholders and have to create profits. The idea is that criticism should be balanced. One shouldn’t just take a one sided view.

Assorted Links

November 28, 2007

1. WSJ Blog points to 2 Fed speeches, here and here.  It also points to a study that estimates of whether things have become more expensive this Xmas.

2. Goldman Sachs expects Fed Funds rate to be 3% by Q2 next year.

3. Rodrik defends

4. Fin Prof points that Fed would inject $ 8 billion in economy during the holiday season.

5. PSD Blog has 2 interesting posts one on Islamic Car and two on Sachs vs Easterly.

6. ESAP Blog has another guest blogger- Praful Patel. His first post is here

7. Economist Blog on why drycleaning women’s shirts costs more.

8. Ajay Shah points to some developments on New Pension System of India

9. This is actually a surprise from an economic think-tank. ICRIER supports capital controls when most have been talking about let capital come and let exchange rate appreciate.

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