Sir John Cunliffe has a nice speech on the topic.
These days most central bankers are trying to pick some incident from history to justify their interventions:
This book by eminent journalist MV Kamath could have been a great book on history of Canara Bank and Indian banking as well. However, the book emerges more like a script written to please Canara bank officials. It does not offer that critique, a skill in which journalists usually excel. Having said that such books are really rare as Indian history is usually limited to political arena. Things like finance and banking are rare, so one has to be content with what one has.
The first edition was published in 1991 commemorating 85 years of the bank (found in 1906). A subsequent edition was released in 2006 on the Bank’s centenary. The first one till 1991 is still a great story but the later edition post 1991 is one where one could have added more spice to the story. The banking game changed post 1991 and the challenges etc. faced by the bank amidst rise in competition could have been explained better.
The book has a fair share of pictures which make it a more engaging reading. Usually history books are dry with just text and more of text. This one is different. Some pictures like that of the founder A Subbarao going in a bullock cart to convince people to subscribe shares of the bank is amazing. Tells you couple of things. First, there was an equity culture way bank in early 20th century in a town like Mangalore. Second, how overall work remains same just that technology changes. Earlier it was bullock carts and now the internet. Third, setting up banks in India was much easier in colonial India than free India. You just had to get the logistics of setting a bank in place. Now it is all so stringently regulated with one committee recommending more banks, other sitting on the advice and then another one granting licences. Why can’t setting banks in India be easier?
Why was the bank started? Well the Swadesi movement was rife in early 20th century. Many banks came up during that time. There was a need to lend money to small businesses etc in Mangalore region. There is also an interesting story that there was a tradition in GSB community that when any child was born, certain sum of money was kept with a trusted person. This money was given to the person on reaching adulthood without any interest. But what if the trusted person became bankrupt or depositor died? There were also cases of the trusted person refusing that such money was given to him at all. Such complaints did come to the founder Subbarao who was an eminent lawyer of his region. The Presidency Bank of Madras had a branch but was mostly for elite. Similar logic was used for setting up Indian Bank in Madras as well which was established in 1907.
In its introduction, the book has a useful discussion on Gowd Saraswat Brahmin (GSB) as the founder came from the same community. How someone from a Brahmin community ended up setting a bank is quite amazing. In discussion on Indian business. we often lose out the role communities have played in setting up firms and banks in India. This was really well explained by Harish Damodaran in his excellent book.
Infact, Canara Bank maintained its competitive edge for a long time because most of its staff came from the GSB community. There is a nice discussion about a study which compared Canara Bank with Punjab National Bank. PNB had a staf coming from all parts of North India and there was no cohesiveness amidst the staff. Whereas Canara Bank was different with branches having a universal similarity to it with things like pictures of deities on walls, incence sticks and so on.
Canara Bank had much more kinship than other banks. This is how other banks in west have also emerged with most having Jewish origins. This is how trust was built. These qualities are no more valued and people want a more diversified culture. This is an interesting aspect of research as to when the qualities of homogeneous staff began to become a weakness.
The book then goes onto discuss how Canara Bank managed all the banking events (both global and national) like Great Depression, World Wars, Independence, Partition and then Bank nationalisation. Interestingly, bank nationalisation did not impact the bank much as the bank’s policy from beginning were more tuned towards welfare of rural/small scale/agriculture. The time period then moves to 1991 when the bank had to fight competition as new private sector banks cam in the picture.
The book could have been a huge introspection exercise as it was re-published and updated in its centenary year. How does the bank move ahead given the competition from both domestic and global banks? How does it fit technology and still maintain its legacy over the years? Is there a future for a public sector bank in Indian banking? If yes, what should Canara Bank do?
From the state of global banking today, the story of Canara Bank has some lessons. How trust was generated amidst Indian public as banks started springing up? Why people came out to banks to give up their hard earned savings? Why despite so called modernism and development of banking, trust is lacking in banking/finance worldwide?
History of Canara Bank does make you wonder and think through these questions..
This is because bubbles and their bursting exposes all the hyped expectations and notions set by economists. Actually bubble is not really a proper word. It is just a reversal of economic cycle and is a pretty normal phenomenon. Just that econs think that their ideas and policies can conquer these cycles only to be humbled.
Noah Smith has a piece on the bubble trouble. He says much of the negation of bubble idea came from rational expectations revolution which has been humbled in the 2008 crisis.
Much of the blame for EZ crisis has fallen on Europe and ECB policymakers. IMF which is usually a key party to such crisis has been ignored.
Nor surprisingly, IMF has retained its record of worsening crisis in EZ case as well. Ngaire Woods of University of Oxford has a piece on the topic. IMF actually ignored six lessons this time:
Jaume Ventura and Hans-Joachim Voth say that it was the debt revolution in Britain which played a strong factor in its industrial revolution as well:
One keeps wondering why is there so much noise over trivial things and nothing at all about things that actually matter. On inflation front, instead of debating about fundamental questions like whether we should have MRP (Maximum retail price), we worry over really trivial things like constitution of MPC and whether the chair of the central bank will have veto power or not. That too seeing what little impact all this has over monetary policy. Whether the chairperson has veto power or not, his/her view usually sails through. There are hardly any cases where we have seen the chair;s views voted out by the committee.
Before, we get into the issue further, what is this whole issue about? In 2011 Budget, Indian givt set up something called Financial Sector Legislative Reforms Commission, The idea was to review and rewrite all the laws/frameworks pertaining to Indian financial sector. The idea was to modernise India’s moribund financial sector and make it jazzy like the western financial world. It was a huge effort and the committee put up the report in March 2013. Comments were sought from the public which again took about two years (why this long?). All who’s who of Indian finance (in India and abroad) were part of this process. Though, on becoming policymakers views of the same advisers changed over the report.
Now, the govt has put up a revised document after incorporating suggestions on the report. One keeps wondering who would have commented on the report? Finance and Financial laws is as elite as it can get. One seriously doubts public has any idea on what is going on. All such hifi finance is by the elite, for the elite and of the elite. But anyways, the process is much better than closed door writing and implementing of such laws.
The govt notice says:
It is Ashes time and I don’t think there could be a better book than this biography of Harold Larwood by Duncan Hamilton. It was a great read over the weekend just ahead of the third test.
This is perhaps one of the best biographies of an unsung cricketer whose impact on the game is felt even today. It is also a great book on the sheer tragedy a person goes through for little fault of his. He is just made a victim of the cricket politics between England and Australia and does not get his due. Ironically, recognition for his efforts come much later in his life when he had actually abandoned the game. The author is partial to Larwood at times and wants to actually resurrect the bower’s image.
Bibek Debroy who chaired the recent railways report has an interesting piece on Indian railways (what else).
He says “If you don’t rationalise the number of trains, there are limited options to de-stress the railways’ high-density networks”:
How many railway stations are there in India? Oddly enough, the answer isn’t straightforward, because there isn’t an unambiguous definition of “station”. How does one count a halt, which may be because of operational reasons and not commercial ones? Does one have a handle on the number of abandoned stations? How does one count a station that has two different gauges passing through? And have you heard of Srirampur and Belapur stations in Maharashtra? On one side of the track, the station is called Srirampur. On the other side, it is called Belapur.
Therefore, though the “official” IR (Indian Railways) figure on number of stations is 7,112, a figure that is 8,000-plus isn’t necessarily wrong. Not all stations are equally important and there is a classification from A1 to F. This is a precise definition, but we needn’t get into that. Suffice to say, A1, A and B stations are more important than the others. A1 and A categories add up to 407. If we wish to prioritise resources spent on station development, these are indeed the ones we should focus on. The station with the most annual revenue is CST Mumbai, followed by Dadar.
Let’s think of a railway route as a track that takes us from point X to point Y. Some stations are junctions, in the sense that more than one route passes through that station. To be called a junction, the norm is that at least three routes must pass through the station. A junction leads to additional problems of switching and signalling.
Roughly, there are around 300 railway junctions. Which junction has most routes passing through? Obvious responses about a busy railway station won’t work. “Busy” originating or terminating stations aren’t junctions. Actually, Mathura is the junction with most routes (six broad gauge, one metre gauge) passing through. Roughly, a cluster of 23 ordinary stations will have a junction, because that’s when one will confront another route. There are exceptions like Nagpur and Ajni stations, where distance between the two stations is only three kilometres. But in general, the distance between two stations is between six and eight km and the distance between two junctions is between 100 and 150 km.
Hmm..Great facts about Indian railways..
Further, he makes a point on rationalisation of number of trains running:
To make the point, I am going to use a simple example. Think of a single line track between two ordinary stations. At any specific point in time, only a single train, moving in either of the two directions, can be on that track. In jargon, in this simple example, that track between two stations is called a block section. Time will be spent on decision-making and the operating of signals, on the driver’s perception and response, and on the train clearing that block section. Let’s say 10 minutes for all this. What’s a reasonable speed for this train? Remember this isn’t a Shatabdi or a Rajdhani. It stops at both stations.
The answer is that anything more than 30 km/hour is impossible. If for computational simplicity if we take the distance between two stations as 10 km, half an hour per train (adding the 10 minutes). Thus two trains per hour, 48 trains per day, even if one ignores time required for maintenance of track. That’s the capacity of this block section.
I recently met a MP who wanted more stops, more trains and greater punctuality. That’s a logical impossibility. Out of 1,219 block sections on IR, 233 are at between 100 and 120 per cent capacity, 193 at between 120 and 150 per cent capacity and 66 at more than 150 per cent capacity.
This is especially serious on the high-density network, that between the metros. If you want more, and faster, trains between Jodhpur and Jaisalmer, that’s never going to a problem, not today. But that’s not where people want more trains. There is an unaddressed issue of unviable routes. There are routes on which there are few trains. There is Ledo and there is Tundla. Within Delhi, there are stations on Delhi Ring Railway.
But for the high-density network, options are limited. Here are some:
(1) Use technology to improve efficiency, including signalling. (Automatic signalling can de facto increase capacity by splitting the block into segments.)
(2) Reduce stops between junctions, so that throughput of trains through ordinary stations is faster.
(3) Back-of-the-envelope, badly-strained capacity is probably around 5,000 km of track. At Rs 10 per km, find the required Rs 50,000 crores. But since these capacity constraints are on high-density networks, they don’t fit the category of national priority projects and GBS (gross budgetary support) won’t be available for this.
(4) While one figures out how to find resources, rationalise the number of trains. I said rationalise, I didn’t say eliminate. Ignoring freight trains, does one need 13,000 passenger trains every day? Why have passenger trains with rakes of eight or nine coaches? Such a merger and consolidation has already been carried out for goods trains, and some doubled trains have more than 120 wagons. If all trains (segregated into three groups: Rajdhani/Shatabdi/Duronto, mail/express, and ordinary) have a template of 24 coaches, there will be no additional shortages because of consolidation. One should probably start with the Allahabad-Kanpur-Varanasi-Mughalsarai stretch – symptomatic of capacity problems, since every day 400 trains pass through this stretch.
But IR is reluctant to touch (1) and (2) – and can’t find the non-GBS of Rs 50,000 crores.