Numbers and US

Story that numbers tell us

40 Years of Bank Nationalization

leave a comment »

Here are  major points raised by Ashok V Desai on an article written on telegraph on forty years of bank nationalization. Ashok V. Desai is consultant editor of The Telegraph, and a columnist in Businessworld. He was my favorite columnist in 2002-03, when I used to read BW. Later on I came to know that he is a highly respected personality, and I took pride in myself that I do have an eye for talent. 🙂

1) Recently banks declared that their NPA are not over Rs 20k crore, and government announced that they are writing off loans of Rs 60k crore issued to farmers. These two figures of 20k and 60k crore imply that either banks have understated their NPA (20k is total NPA, not loans only to farmers) or government has written off loans to farmers who were diligently paying their debt.  Third possibility is major chunk of money those 60k crore is warming pockets of politicians and bureaucrats. (from BW editorial)

2) Banks were nationalized to give credit to government’s favorite sectors (agriculture and small industries). But they didn’t do so. Later on government imposed them to lend 40% of their credit to these sectors, they did so for a while, but ironically soon ran out of worthy borrowers.

3) In last ten years, banks have been financing infrastructure sectors – power, telecommunication, roads, ports. Almost 25% of their loan goes to these sectors. This goes against traditional rules that required banks to give short term loans against liquid collateral. These sectors should have raised loan from capital market. On pretext of it’s lack of development in India nationalized bank financed long term loans to them, though for long term financing government had created -IDBI,ICICI,UTI.  Consequently, these three entities got converted into banks.

4) It was envisaged that nationalized bank will expand their operation in rural areas. They did expanded their business, but more in urban area than in rural areas.

Note: One may question, why should we raise question over what they have done as long as they are profitable. The point is they are not profitable, and they have not done what they have been nationalized (insurance of getting bailed out) for.

He concludes his article with following words.

My findings are based on a cursory analysis of easily available banking statistics. So much more could be inferred from the masses of statistics accumulated by the Reserve Bank of India. All it needs is a good, elementary economist. The RBI employs economists by the hundreds; the finance ministry gives generous grants to many more. But their minds are focused on higher matters; looking at easily available figures and calculating simple ratios would not occur to them. So we continue to have one of the world’s best documented and least analysed banking systems.


Advertisements

Written by SK

September 17, 2009 at 7:49 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Humor, Sarcasm from & on Silicon Valley

Let's have a laugh together

Product Thinking

Peeling the layers of products that delight

WordPress.com

WordPress.com is the best place for your personal blog or business site.

%d bloggers like this: