Letters

Banking reforms

| Updated on October 04, 2018 Published on October 04, 2018

 

With refernce to “Why merger of PSBs is not a good idea” (October 4), reorganisation of the banking system was never taken up seriously, though it would have helped India grow faster in the post-reforms period. As regards public sector banks (PSBs) including the SBI and its associates, post-nationalization there was no rationale for keeping several identities with no basic differences in the way they functioned.

The problem with committees and commissions appointed by the government is, that many of the reports are written on dotted lines (like FSLRC report). When the reports are professional, like the Narasimham Committee report, the government cherry picks the recommendations made for implementation.

While profitability has to be an important consideration while sizing up banks by merger, that criterion may not be amenable to comparisons pre- and post-merger for obvious reasons. Just as the RBI’s functions and role since inception cannot be compared with those of any major central bank in the world, the use of PSBs as a conduit of credit has made them a special category deserving special treatment. So the government must compensate them for the losses incurred for lending to priority sectors or penetrating to unbanked areas.

Banking sector and RBI are being blamed for the unethical handling of resources by ‘rich’ borrowers with the blessings of political leadership. The present problem of stressed assets is the result of using public sector as a milch cow for pampering vested interests in the private sector by political leadership.

MG Warrier

Mumbai

Engaging Pakistan

With reference to ‘How not to engage with Pakistan’, it was only wise on India’s part to cancel foreign ministers’ meeting in New York because due to the ceasefire violation and killing of innocent police officers. The non appointment of a National Security Advisory is testimony of the fact that Pakistan does not want to engage with us on security related matters, while that remains the biggest bone of contention for us.

As far as conducting SAARC in Pakistan is concerned, it would be really naive on the part of other participating countries like Nepal, Bangladesh and Bhutan to attend this critical meeting.

Bal Govind

Noida

IL&FS saga

With reference to ‘Deep Dive — The ILFS Saga (October 4), it is shocking that asset-liability mismatch is the main reason for the default. In any financing business asset-liability management is the key for survival and it is more so for an infrastructure lending company which lends on very long term basis. The situation has obviously arisen due to diversion of funds to unrelated activities and defaults which have caused cash crunch.

This big a gap would not have arisen overnight and if ever greening was carried out in a surreptitious manner even rating agencies cannot find them out. The directors cannot shirk responsibly though they have their limitations. In companies of this kind where the government has considerable ownership directly or through PSUs a mechanism should be devised for which books will be re-audited periodically to avoid a recurrence.

M Raghuraman

Mumbai

Market volatility

Although weak global-cues are a dampener, recent concerns highlighted by the regulator call for investigation into the induced volatility, especially when the recent drop hasn’t been backed by high volumes. In the past, the market has witnessed instances ranging from breach of information security to trading malpractices. Underwriters or lead brokers — aware of the performance of the company in real-time, shouldn’t be allowed to misuse/share the information to advantage. Well-developed mobile, messaging and internet technologies has made it virtually impossible to restrict the multicast flow of market information.

However, an intelligent, rule-based, proactive surveillance mechanism ought to be enforced to micro-monitor trading sessions, especially those preceding key events/disclosures, in order to track the bulk/block deals for undue price movements on symbols.

Girish Lalwani

New Delhi

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Published on October 04, 2018
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