Archive for April 21st, 2017

Why does Indian central bank need things like Prompt Corrective Action despite having inspection powers under Banking Regulation Act?

April 21, 2017

Despite many years of rising NPA and bank problems, we just keep moving from one regulation to other. The latest regulation is Prompt Corrective Action which  apparently is not really new. It was started in 2002 and has been modified recently in 2017. As expected, media is buzz with whether this PCA 2.0 will correct banking problems.

What is not understood or questioned how these things have gone so wrong?

RBI is perhaps one of those few central banks which has extensive powers to regulate and monitor our banks. The central bank got these powers under Banking Regulation Act (1949). Section 35 of the Act gives wide inspection powers to the central bank. RBI in its first history volume celebrates passage of this Act which gave central bank powers to put our banks in order. Apart from capital and reserves requirements, the History notes:

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College dropouts who rule the world are rare exceptions – not the rule…

April 21, 2017

An important reminder from Jonathan Wai (Research Scientist, Duke University) and Heiner Rindermann (Professor of Educational and Developmental Psychology, Chemnitz University of Technology).

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How David Ricardo wrote about problem of distribution and inequality 200 years ago…

April 21, 2017

It is 200 years anniversary of David Ricardo’s idea of comparative advantage.  His book “On The Principles of Political Economy and Taxation” was released in 2017.

Oleg Komlik of Economic Sociology blog has a different take on the 200 anniversary of the book. One should not be surprised as economists usually hype very limited ideas from such classics. The best example is Adam Smith’s Wealth of Nations which has so many ideas but the profession just writes about invisible hand which Smith mentions just once in the book!

Coming to Ricardo. Hewrote about problems of distribution right at the beginning of the book. Economics is mainly about two problems: production and distribution. For the longest time, the profession focused just on first problem. After years of ignorance, this distribution problem is haunting much of the economics profession today.

But like of Ricardo wrote about it way back:

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