Archive for the ‘Indian Economy/Financial Markets’ Category

When the definitive history of demonetisation is documented, RBI’s valiant defence of financial stability hopefully gets its due?

November 21, 2017

It is like when the kings force war onto its people and then saying look how well I defended you.

RBI Executive Director and MPC member Michael Patra in this speech reviews one year of RBI’s Monetary Policy Committee and comments:



Godrej Locks aiming to be ahead of thieves

November 20, 2017

Godrej Locks has roped in reformed robbers.thieves to talk about security:

Traditional wisdom has it that the best place to hide things from a thief is right under his nose.

Security solutions company Godrej Locks has gone a step ahead, getting the thieves themselves to dispense advice on how to secure yourselves from risk and theft.

In a series of three videos, three robbers, now reformed, let viewers into some tricks of their trade – such as ways to break a lock – and reiterate that thieves will stop at nothing, even murder.

Shyam Motwani, Executive Vice-President, Godrej Locks, says the persons featured in the videos “have done all kinds of gruesome things to achieve nefarious objectives”. The company tapped many sources, including the police to track these people. They have all done time in jail. “Now that they are reformed, they were more than willing to talk,” Motwani says.

The videos are primarily to spread awareness but end with the former thieves certifying Godrej Locks as ones that cannot be tampered with.

Mention the scores of movies where robbers overcome sophisticated technology to carry out heists and Motwani says that in real life, electronics and biometrics make it difficult. Unless someone has placed a spy cam atop your door and figures out your passcode, they cannot gain entry. It’s important to change the code regularly, he adds.

Also, with mechanical locks that have several bolts, it’s not worth a thief’s time to get through every single one because he may well be discovered before he finishes the job, he says. He adds, though, that it’s a fact that thieves would want to get ahead of the technology, “so it’s our challenge to develop even more sophisticated technology and be ahead of them”.


From tea to chai: a slideshow..

November 15, 2017

Sreedeep of Shiv Nadar Univ has a slideshow of the tea to chai journey:

This is what goes into every sip: centuries of colonial plantation history, hours of labour withstanding the sun and the rain, meticulous plucking of the freshest leaves, series of mechanised crushing, rolling, packing; and most importantly — a passion for tea. Only the fresh leaves on top make it to the factory. Labourers are paid a paltry amount of ₹300 for a day that includes nine hours of hard labour.

While the finest leaves are hand plucked, a tea processing machine chops the rest of the leaves to produce regular tea. Leaves are gathered and transported to the factory at the end of the day. At the factory, the leaves are spread on withering troughs, after which a mixture of hot and cold air is passed through them for 12 hours. This removes the moisture from the leaves, before they are thrown into the crushing machine. Roughly 4,000 kg of leaves produce 1,000 kg of packaged tea dust.


Digitial push is leading banks to turn away senior citizens and differently-abled persons? Also missed lessons from Syndicate Bank…

November 10, 2017

In October 2017, RBI in its Statement on development and regulatory policy noted (released along with monetary policy):

8. Banking Facility for Senior Citizens and Differently abled Persons

It has been reported that banks are discouraging or turning away senior citizens and differently abled persons from availing banking facilities in branches. Notwithstanding the need to push digital transactions and use of ATMs, it is imperative to be sensitive to the requirements of senior citizens and differently abled persons. It has been decided to instruct banks to put in place explicit mechanisms for meeting the needs of such persons so that they do not feel marginalised. Ombudsmen will also be advised to pay heed to complaints in this context. Necessary instructions in this regard will be issued by end-October 2017.

So, in this digital madness suiting the young and efficient, banks are making these choices. Amazing how every person in this country is seen as dishonest till he is totally digitalised.

Having said this, one is really surprised to see some banks actually doing this. But trust humanity to do anything these days. I mean one still can’t figure why should a regulator have to step in for such basic things. Have Indian banks totally lost it?

Anyways, based on above RBI released a notice asking banks to take steps to reach out to senior citizens and differently abled people. It includes measures like accepting forms physically, cheque book facility, dedicated counters for senior citizens and soon. The last step is:

(g) Door Step Banking

We have issued instructions on Doorstep Banking vide circular DBOD.No.BL.BC.59/22.01.010/2006-2007 dated February 21, 2007 under Section 23 of Banking Regulation Act, 1949. However, in view of the difficulties faced by senior citizens of more than 70 years of age and differently abled or infirm persons (having medically certified chronic illness or disability) including those who are visually impaired, banks are advised to make concerted effort to provide basic banking facilities, such as pick up of cash and instruments against receipt, delivery of cash against withdrawal from account, delivery of demand drafts, submission of Know Your Customer (KYC) documents and Life certificate at the premises/ residence of such customers.

Amazing again. How little we learn from lessons of past practices in banking! This is perhaps unique to India where despite a rich financial and banking history, we just pay no heed to the lessons. Syndicate Bank had in late 1920s showed the utility of door to door banking but it seems nothing was learnt. The scheme was mainly for mobilizing pigmy desposits but showed how banks could connect with customers in a big way.

Infact door to door banking goes a long way here but earlier it was manly to give credit and collect the proceeds. These were all called as loan sharks and quite a few Hindi and regional movies show them. But Syndicate Bank turned it towards deposits which was seen as really positive as it “nudged” people towards savings and then borrowing against the same.

Infact, I learnt from series of circulars mentioned in the 2017 circular that RBI restricted door step banking in 1983. So, instead of taking positives from the scheme one just limited it. Then in 2005, RBI lifted some restrictions for government departments and the further guidelines were issued to streamline the process in 2007.

All in all, as we keep digitally pushing people and glorify tech leaders who are just destroying jobs, there is realization that age old practices still have relevance. Earlier door step banking was used for one and all and now RBI is suggesting banks to use it to serve the old and differently-abled people..

Tamil Nadu has stringent laws against moneylending at exorbitant rates. Why does it persist then?

November 8, 2017

Vinita Govindarajan has a piece in Scroll:

On October 23, Essakkimuthu, a daily wage labourer from Kasidharmam village in Tirunelveli, Tamil Nadu, took his wife and two young daughters to the District Collectorate. There, the 28-year-old doused his family and himself in kerosene and lit the match. While his wife and children died soon after, Essakkimuthu was hospitalised for a few days before he succumbed to his injuries.

A picture of the blackened body of Essakkimuthu’s 18-month-old child lying face-down on the ground made it to the cover of the popular Tamil magazine Junior Vikatan, and subsequently to social media, sparking shock and outrage across Tamil Nadu.

Essakkimuthu had borrowed Rs 1.45 lakh from a moneylender in Tirunelveli, identified as Muthulakshmi. The labourer had already repaid over Rs 2 lakh, but the moneylender was allegedly harassing him for more. According to his brother Gopi, Essakkimuthu had filed complaints at six weekly grievance redress meetings held at the collectorate. But the police did not act against the moneylender, Gopi alleged, because they work in collusion with moneylenders in the area.

Asked about this, the collector, Sandeep Nanduri, told The Hindu, “We will concentrate on this serious issue by forming a police special squad to enquire into the complaints pertaining to usury.”

This bit on types of credit, linking of caste networks with credit is always amazing to read:


Economists should keep asking big questions and economics columnists should relate and explain the discussion..

November 7, 2017

Gene Epstein has a piece of advice for both economists and economics columnists (and both):


Amidst discussions on India’s national food, India post issues 24 commemorative stamps celebrating Indian cuisine..

November 6, 2017

There has been a fair bit of discussion lately on khichdi being named as India’s national food only to be refuted by authorities later. In a country with so many cuisines, one wonders why bother about national food at all?

Taking a cue India Post issued 24 commemorative stamps celebrating Indian cuisine (HT: BetterIndia. As one scrolls the list, needless to say the mouth starts to water seeing most of the dishes (if not all). Just amazing diversity.

There is a discussion in ToI on origins of Hyderabad Biryani:


Bank recapitalisation bond plan: An attempt to hide failure of banking regulator?

November 2, 2017

Ila Patnaik writes a scathing piece on the recent Banking recapitalisation bond plan. She says the problem is not limited to public banks alone but even private ones which have hidden NPAs all the while. What was regulator doing all this while?


Gabbar Singh teaches us about Moral Hazard, Banking crisis and NPAs

November 1, 2017

Avinash Tripathi (@qfint)is quickly becoming one of the key guys to read/follow regarding economics (and movies).

His recent piece is on what Gabbar Singh teaches us about moral hazard, banking crisis and NPAs. He is hardly new to this genre and has written earlier pieces linking game theory to Sholay, RGV’s Company and now Sholay’s Gabbar to moral hazard.

Though, this time Avinash even quotes from Hebrew Bible:


The evolution of the promises on India’s banknotes (1770 onwards)

October 31, 2017

JP Koning has another fascinating post on how the promises on the banknotes have changed over the years.

Taking a cue, I looked at India side of the story as well (Source: The Paper and the Promise written by Bazil Sheikh and Sandya Srinivasan). This is how it goes:


Studying the history and rich traditions of India’s religious institutions…

October 31, 2017

India’s Prime Minister recently asked Universities to study the history and rich traditions of India’s religious institutions:


How badly does India need banking? (bank based financial system vs market based financial system?)

October 31, 2017

Ajay Shah writes on recent Bank recapitalisation (history here and current specifics here).

He asks several questions related to this policy and much of which has already been discussed.

But this first question caught my attention:


The specifics of Bank recapitalisation 2017…

October 30, 2017

Post my post on history of bank recapitalisation bonds, there is a nice article by Avinash Tripathi on the specifics of the recent scheme taking cues from the previous scheme.

Via Avinash, I also learnt where these outstanding bonds from previous recapitalisation worth Rs 20808.75  crore are shown in the budget. These bonds are classified here on receipts budget.

Infact, you see this Receipts Budget and there are several such special securities converted into marketable securities. The governments have always been great at all kinds of financial engineering and there are several such cases in the Receipts Budget…

PSUs devote over Rs121 crore of CSR funds towards ‘Statue of Unity’

October 27, 2017

Interesting news:

India’s leading public sector oil companies contributed over Rs121 crore towards the construction of the ‘Statue of Unity’ (SOU)—a gigantic statue of Sardar Vallabhbhai Patel in Gujarat—as part of their corporate social responsibility (CSR) spend during the fiscal year 2017.

According to their annual reports, the country’s four public sector oil companies – Oil and Natural Gas Corp. (ONGC), Hindustan Petroleum Corp. Ltd (HPCL), Indian Oil Corp. Ltd (IOCL) and Oil India Ltd (OIL)—recorded contributions towards the SOU project as part of their CSR activity in FY17.

ONGC reported a contribution of Rs 50 crore; OIL and HPCL of Rs 25 crore each; and IOCL donated Rs21.83 crore.

These contributions resulted in three-fold jump in CSR spends by the top 100 National Stock Exchange-listed firms by market capitalization in FY17 under National Heritage initiatives as compared to the previous fiscal year.

As per data analysed Goodera (previously NextGen), a CSR and sustainability management platform, the reports of 92 companies were available until 18 September. The data shows a total of Rs 155.78 crore was spent on national heritage initiatives in FY17, compared to Rs 46.51 crore in FY16.

“The reason for a spike is increased investment by PSUs, which have spent 70% of the Rs 156 crore. Government policies have created an enabling environment for this sector, as in the case of Statue of Unity project. PSUs happened to be the first movers, wherein three organizations – Indian Oil Corporation, ONGC and Hindustan Petroleum, have together contributed over Rs 98 crore for the Statue of Unity project, which is two thirds the total spend in the heritage sector,” said Richa Bajpai, Founder and Co-CEO, Goodera.

This was opposed earlier but then contribution towards National Heritage was included in CSR:

The CSR spends on SOU was criticised as a “violation of the intention” of the CSR law & Companies Act of 2013 by Amita Joseph, Director Business Community Foundation (BCF), a civil society organization working on promoting responsible business practice

“This is taxpayer money, and both public sectors (companies) and governments need to be accountable,” she said, describing the case as one of “misplaced priorities” in a country that is in desperate need of better education, healthcare, basic amenities, safety and public infrastructure.

Bhaskar Chatterjee, former Director General and CEO of the think tank Indian Institute of Corporate Affairs (IICA) said the national heritage category was introduced into the CSR rules in order to bring businesses within the development ambit, and allow them to work for national development programmes.

“It is one of the few items which do not relate to the poorest of the poor, but the idea was to see how the corporate sector could contribute to the preservation of our cultural heritage.”

It is so important to read the fine print of such rules here. The Governments continues to find innovative ways to get funds from PSUs….



After Axis Bank, comes Yes Bank woes…(The hype that only Public Sector Banks are villains is so wrong…)

October 27, 2017

Amidst Nationalised Banks recapitalisation, the so called efficient and well run private banks show they are no different. This reminds me of a conversation I had with friends a year back that how all this image of private banks is just a mirage. They said in public sector banks one knows the true picture  but private sector banks just hide most stuff amidst the glamour. I was told wait & watch and be prepared to be shocked!

Indeed that is happening.

Andy Mukherjee after ripping Axis Bank, writes another one on Yes Bank:

Oh no, Yes Bank. You don’t get to spin a yarn about the wonderful quarter you’ve had.

You don’t get to fill page after page of your earnings presentation with arrows pointing up, up and up. The bragging about how you are the world’s second-most-social brand (whatever that means) can also wait.

There’s only one question for you to answer. Actually, make that two.

First, how does Yes Bank Ltd. even begin to justify that the regulator, the Reserve Bank of India, found nonperforming assets to have been four times as large on March 31 than was then acknowledged in audited results?

 Second, how did the management credit committee, packed with such stalwarts as the managing director, the chief risk officer, the risk heads, business heads and product heads (and tasked to review among other things stressed accounts) allow an extra $1 billion of them to masquerade as standard assets? The last full year of profit was inflated as much as 44 percent by that means.
Where Yes deserves full marks is for confidence. Managing Director Rana Kapoor is willing to let the provision coverage ratio at Yes drop to 43 percent, from 60 percent a quarter ago. Evidently, he’s expecting recoveries.
Governance or lack of it has become such an important issue…

Lessons from History of bank recapitalisation bonds issued in 1993-94…

October 26, 2017

Talk about political ironies really. One one hand the current government continues to hold previous government for all India ills and on the other keeps picking policy solutions from the same government.

On this Tuesday, Government announced a public sector bank bailout sorry recapitalisation plan worth Rs 2.11 lakh crore. The plan will have two components:

Out of the total commitment, Rs1.35 trillion will come from the sale of so-called recapitalisation bonds. The remaining Rs76,000 crore will be through budgetary allocation and fundraising from the markets.

The bank recapitalisation package marks a sharp increase over the current budgetary allocation. Under the Indradhanush plan, the government has allocated Rs20,000 crore towards bank recapitalisation over the current and next fiscal years.

Interestingly, the same plan was approved by the Indian government in 1993. The then Finance Minister Dr Manmohan Singh in Budget speech of 1993-94 said:


Don’t fall for anything called Tax Reform….

October 24, 2017

Jeff Deist of Mises Institute has a piece. It applies to India which is struggling with its GST which ironically was billed as the biggest economic reform of the country:


Prof Sunil Amrith: Recipient of a Macarthur fellowship for digitizing historical data on Indian economy!

October 20, 2017

Just learnt about this interesting development..

Hope more and more Indian economy historical data is digitized and put up in public space.

Also, should read up Prof Amrith’s work….

Axis Bank woes…

October 20, 2017

Andy Mukherjee hits and hits hard:

Axis Bank’s credit costs have surged, mainly as a result of the nine accounts the lender has had to reclassify as nonperforming assets.

Whichever way you look at it, the failure of governance at Axis is now absolute. That other banks will also be admitting to having similarly lied about their nonperforming loans can’t be an excuse.

If the non-executive directors of Axis, including the former bureaucrat who chairs it, feel even a modicum of responsibility toward shareholders, they should quit, and leave it to a new board to deal with management and its fibs.

Governance has become such an issue…

Yedu Krishna- The first Dalit priest recruited by Travancore Devaswom Board of Kerala…

October 18, 2017

Recently, Travancore Devaswom Board which administers 1246 temples in Kerala announced it would appoint 36 priests which were non-Brahmins including 6 Dalits.

There was this profile of Yedu Krishna who was the first Dalit priest. Today Times of India runs an interview of Yedu who gives you a glimpse of the training and the exams one has to undergo to become a priest.


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