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THE
HINDU: Owning without interfering
Promises
are extremely easy to make for a politician. The problem, however, lies in
delivering on them. Tougher still is to do so in a time-bound manner.
The
coming Union budget provides Finance Minister Arun Jaitley that one near-term
opportunity to walk the talk, and make good his words. Mr. Jaitley appears to
be acutely aware that time is ticking away. He also understands that any
dithering on the reform front would drastically impair the chances of a quick
economic recovery for the country. Realising the exceptional predicament he
finds himself in at the moment, the Finance Minister hinted at a series of
banking reforms while addressing a session at Make in India Week in Mumbai on
Sunday. The Indian banking system is in crisis at the moment with bank after
bank, especially the government-owned ones, reporting hefty losses in the face
of mounting bad loans. The Reserve Bank of India’s ordained clean-up
notwithstanding, the banking system desperately needs to be pulled permanently
away from the legacy elements that have played havoc for long. “The government
is committed to zero interference and letting the institutions run
professionally,” Mr. Jaitley said in Mumbai. “And the boards of the banks have
to be run professionally.” He went on to assert that the government would
ensure the banks worked purely on professional considerations. At the same
time, he felt that the country had not reached a stage where the government
could pull out of the banking system altogether. “If you see the last
three-four decades, state-owned banks have played an important role as they
reached out to areas where there was no banking,” he said. No doubt, the
banking system remains out of bounds for far too many underprivileged sections.
However, oftentimes this fact has been conveniently used to perpetuate the
government’s hold over the banking system. Reducing its financial stake in
state-owned banks can, at best, help fill the coffers of the government. It
does not, however, unburden the government of the problem of conflict of interest.
History is replete with instances of subtle and not-so-subtle interference by
the government in the banking system, resulting in decisions based on partisan,
populist or simply expedient considerations.
If
the zero-interference assurance given by Mr. Jaitley has to have any meaningful
and practical implication, the government would do well to at least reconfigure
its financial stake in the banking industry. This could be done by ring-fencing
the government’s equity stakes in banks by transferring its shares into an
independent, professionally-managed holding company. In an integrated global
environment, financial decision-making has become an increasingly complex
process involving very many dynamic imponderables. Given that fact, banks will
be well-served if they are allowed to carry on their businesses without
somebody interfering in their work time and again. The circumstances are
currently ideal for Mr. Jaitley to break new ground in the banking field.
own
Have (something)
as one's own; possess.
in·ter·fere
Prevent (a
process or activity) from continuing or being carried out properly.
a·cute·ly
(with reference
to something unpleasant or unwelcome) intensely.
tick
(of a clock or
other mechanical device) make regular short sharp sounds, typically one for
every second of time that passes.
dith·er
Be indecisive.
drastically
In a drastic
manner
im·pair
Weaken or
damage something (especially a human faculty or function).
heft·y
Large, heavy,
and powerful.
mount
Climb up
(stairs, a hill, or other rising surface).
or·dain
Make (someone)
a priest or minister; confer holy orders on
not·with·stand·ing
In spite of.
des·per·ate·ly
In a way that
shows despair.
hav·oc
Widespread
destruction.
conveniently
Handily: in a
convenient manner; "the switch was conveniently located"
per·pet·u·ate
Make
(something, typically an undesirable situation or an unfounded belief) continue
indefinitely
re·plete
Filled or
well-supplied with something.
sub·tle
(especially of
a change or distinction) so delicate or precise as to be difficult to analyze
or describe.
ex·pe·di·ent
(of an action)
convenient and practical, although possibly improper or immoral.
im·pon·der·a·ble
A factor that
is difficult or impossible to estimate or assess.
THE HINDU: Conundrums for the
Congress
In West
Bengal, Kerala, Tamil Nadu, Assam and Puducherry that will face Assembly
elections in 2016, the Bharatiya Janata Party is relatively weak, but the
political configuration in these States (and a Union Territory) will not make
it any easier for the party’s chief national opposition, the Congress, to take
advantage of the situation. The Congress senses that the road to its revival at
the Centre passes through these States’ alleyways where regional forces
dominate, except in Assam. In Tamil Nadu, the Congress has resurrected its
tried-and-tested alliance with the Dravida Munnetra Kazhagam to consolidate
votes in the State’s multi-party electoral landscape. Even so, for the Congress
it will be a tough task to sell this alliance as a better alternative to the
ruling All India Anna Dravida Munnetra Kazhagam, as public memory of the United
Progressive Alliance is still relatively fresh. The Congress’s other
alternative was to throw its weight behind a third front, but the party has
long forsaken any ambition to lead a non-Dravidian alliance. Its weak presence
is a consequence of its long-term decline in Tamil Nadu, despite the hold in
the popular imagination of “Kamaraj rule”, the party’s halcyon days some 50
years ago. In any case, its claim to the Kamaraj legacy is now under dispute
following the revival of the Tamil Maanila Congress. Whether the Congress’s
aspiration for short-term gains will materialise depends less upon political
arithmetic and more on the public appraisal of the ruling AIADMK. And with the
opposition space still being inchoate, the outcome is difficult to forecast.
In
Kerala and West Bengal, the Congress is caught in a bind. The wilful adoption
of a subsidiary role to Mamata Banerjee’s Trinamool Congress enfeebled the
Congress over time, and explains its State leadership’s desperation now to ally
with its long-term nemesis, the Communist Party of India (Marxist)-led Left
Front. But just as the CPI(M)’s central leadership is divided over the question
of an alliance — its West Bengal unit is in favour of a tie-up even as the
central leadership remains undecided — the Congress high command faces a
Hobson’s choice. An alliance with the Left Front would enable a viable contest
against the Trinamool Congress and thus a better harvest of seats in West
Bengal — but this may help the BJP gain a foothold in Kerala where the
Congress-led front and the opposition CPI(M)-led front are the main
contestants, and are at loggerheads. For the Congress leadership, leaving the
political choice of alliance-building to its federal units based on local
expediency is an easier option. This is unlike the Left Front, which cannot
take a political decision without answering ideological questions on a tie-up
with the Congress and what this would mean for its chances in Kerala, where it
would hope to gain from anti-incumbency against the Congress. In Assam, the
Congress’s choices are less stark but its challenges — the burden of
anti-incumbency and a communally polarised build-up — are strong. The party has
its task cut out.
co·nun·drum
A confusing and
difficult problem or question.
re·viv·al
An improvement
in the condition or strength of something.
al·ley·way
Another term
for alley1
res·ur·rect
Restore (a dead
person) to life.
con·sol·i·date
Make
(something) physically stronger or more solid.
e·lec·tor·al
Of or relating
to elections or electors.
con·se·quence
A result or
effect of an action or condition.
hal·cy·on
Denoting a
period of time in the past that was idyllically happy and peaceful.
ap·prais·al
An act of
assessing something or someone.
will·ful
(of an immoral
or illegal act or omission) intentional; deliberate.
log·ger·head
A reddish-brown
turtle with a very large head, occurring chiefly in warm seas.
ex·pe·di·en·cy
The quality of
being convenient and practical despite possibly being improper or immoral;
convenience.
stark
Severe or bare
in appearance or outline.
in·cum·ben·cy
The holding of
an office or the period during which one is held.
po·lar·ize
Restrict the
vibrations of (a transverse wave, especially light) wholly or partially to one
direction.
BUSINESS
STANDARD: Tip of the iceberg
Banks' third-quarter results have made it
impossible to further ignore a disquieting fact - that banks in India,
especially the public sector (PSU) ones that control 70 per cent of the
business, have been hiding potential bad loans for far too long. The enormity
of it all has now hit, as provisioning by state-run banks for their gross
non-performing assets has grown by over Rs 1 lakh crore between September and
December, 2015. Compared to the year-ago period, gross non-performing assets
(NPAs) of the banking sector as a whole have gone up by almost 50 per cent,
from Rs 2.92 lakh crore in December 2014. The massive provisioning followed a
directive by the Reserve Bank of India (RBI) that in their December and March
quarter results, banks have to fully provide for 150 identified accounts that
have been broadly grouped into three categories: borrowers regarded as standard
in the books on technical grounds but are actually facing stress; accounts that
are in trouble as projects are behind schedule; and accounts where
restructuring of loans has failed. More bad assets would be brought on the
table in the March quarter and there could also be further slippages, spelling
further gloom for PSU banks.
To calm the jittery markets, RBI Governor Raghuram Rajan and Finance Minister Arun Jaitley have played down apprehensions about the health of state-owned banks. But the stark reality is that the current stress felt by India's banks could be just the tip of the iceberg, as the problems run much deeper. That's because the RBI-mandated scrutiny of loans for provisioning purposes is just for 150 accounts. While estimates vary about the percentage of their contribution to the total bad assets problem, one safe assumption is that quite a few accounts besides these could fall in the troubled category soon enough - or perhaps already do - going by the sheer number of indebted business tycoons and a long tail of midsize enterprises. For example, according to Credit Suisse AG, financial stress at the top 10 Indian conglomerates has intensified even as some of them cut back on capital expenditure and attempted to sell assets to pare debt. In its update of an earlier report, Credit Suisse said debt at these groups has risen seven times over the past eight years and their loans add up to 12 per cent of the loans in the banking system in India. It can be argued that this has happened because of a rather long period of regulatory eclipse that allowed banks to remain oblivious to several companies raising their debt to unsustainable levels.
The government has now talked about giving state-run banks "adequate" capital to tide over the problem and has also advised them to raise money from the market while retaining the government's control. Unfortunately, the first option will be regarded as a bailout of powerful business groups who continue to remain unpunished for their failure to honour a financial commitment and behave as if deleveraging and repaying loans are the least of their concerns. What is worse, taxpayer's money is likely to be used to recapitalise banks without any linkage to their performance or past record in preventing accumulation of bad loans. The second option is impractical at a time when many banks now quote at a discount of 75 per cent. After all, which state-owned bank will be valued at close to book by the market? Then there is the problem of banks not having the legal muscle to deal with willful defaulters, with the new bankruptcy Bill still pending in an increasingly fractious Parliament. The only real course of action before the government is to take the P J Nayak Committee report seriously and genuinely reduce the role of government. Only a vigilant board led by a chief executive who comes from outside the "system" can stem the rot. The path leads surely to real disinvestment, and loss of government control. Experience shows that the biggest reforms have happened when there has been an acute crisis. It's time for the "surgery" that Dr Rajan talked about the other day.
To calm the jittery markets, RBI Governor Raghuram Rajan and Finance Minister Arun Jaitley have played down apprehensions about the health of state-owned banks. But the stark reality is that the current stress felt by India's banks could be just the tip of the iceberg, as the problems run much deeper. That's because the RBI-mandated scrutiny of loans for provisioning purposes is just for 150 accounts. While estimates vary about the percentage of their contribution to the total bad assets problem, one safe assumption is that quite a few accounts besides these could fall in the troubled category soon enough - or perhaps already do - going by the sheer number of indebted business tycoons and a long tail of midsize enterprises. For example, according to Credit Suisse AG, financial stress at the top 10 Indian conglomerates has intensified even as some of them cut back on capital expenditure and attempted to sell assets to pare debt. In its update of an earlier report, Credit Suisse said debt at these groups has risen seven times over the past eight years and their loans add up to 12 per cent of the loans in the banking system in India. It can be argued that this has happened because of a rather long period of regulatory eclipse that allowed banks to remain oblivious to several companies raising their debt to unsustainable levels.
The government has now talked about giving state-run banks "adequate" capital to tide over the problem and has also advised them to raise money from the market while retaining the government's control. Unfortunately, the first option will be regarded as a bailout of powerful business groups who continue to remain unpunished for their failure to honour a financial commitment and behave as if deleveraging and repaying loans are the least of their concerns. What is worse, taxpayer's money is likely to be used to recapitalise banks without any linkage to their performance or past record in preventing accumulation of bad loans. The second option is impractical at a time when many banks now quote at a discount of 75 per cent. After all, which state-owned bank will be valued at close to book by the market? Then there is the problem of banks not having the legal muscle to deal with willful defaulters, with the new bankruptcy Bill still pending in an increasingly fractious Parliament. The only real course of action before the government is to take the P J Nayak Committee report seriously and genuinely reduce the role of government. Only a vigilant board led by a chief executive who comes from outside the "system" can stem the rot. The path leads surely to real disinvestment, and loss of government control. Experience shows that the biggest reforms have happened when there has been an acute crisis. It's time for the "surgery" that Dr Rajan talked about the other day.
dis·qui·et·ing
Inducing
feelings of anxiety or worry.
e·nor·mi·ty
The great or
extreme scale, seriousness, or extent of something perceived as bad or morally
wrong.
slip·page
The action or
process of something slipping or subsiding; the amount or extent of this.
gloom
Partial or
total darkness.
ap·pre·hen·sion
Anxiety or fear
that something bad or unpleasant will happen.
scru·ti·ny
Critical
observation or examination.
man·date
Give (someone)
authority to act in a certain way.
ty·coon
A wealthy,
powerful person in business or industry.
con·glom·er·ate
A number of
different things or parts that are put or grouped together to form a whole but
remain distinct entities
suisse
Switzerland: a
landlocked federal republic in central Europe
bail·out
An act of
giving financial assistance to a failing business or economy to save it from
collapse.
de·lev·er·ag·ing
The process or
practice of reducing the level of one's debt by rapidly selling one's assets.
re·cap·i·tal·ize
Provide (a
business) with more capital, especially by replacing debt with stock.
frac·tious
(typically of
children) irritable and quarrelsome.
vig·i·lant
Keeping careful
watch for possible danger or difficulties.
a·cute
(of a bad,
difficult, or unwelcome situation or phenomenon) present or experienced to a
severe or intense degre
INDIAN
EXPRESS: Bitter tweet
I feel that as leaders of the
ruling party, we must be extra cautious while making any statement. All leaders
must ensure that statements are reflected in proper perspective and cannot be
misinterpreted.” That was Rajnath Singh in
October 2015, reprimanding General V.K. Singh for protesting that the Central
government could not be held responsible if “someone threw a stone at a dog”.
It was in revoltingly bad taste because he referred to the killing of two Dalit
children in Faridabad, near Delhi. “We can’t get away by saying that statements
were misrepresented or twisted,” Rajnath Singh had added. This week, the very
same home minister presented a fake tweet as the real thing, confirming that
the commemoration of the hanging of Afzal Guru at Jawaharlal Nehru University
was backed by Lashkar-e-Taiba leader Hafiz Saeed.
Rajnath Singh is familiar with
inaccurate attribution. During the intolerance debate in Parliament, Mohammed
Salim of the CPM had launched a blitz on him on the basis of an erroneous
magazine article, accusing him of hailing Prime Minister Narendra Modi as the “first Hindu ruler [of India] in
800 years”. Rajnath Singh had demanded that he either withdraw or substantiate
the charge, and eventually it was deleted from the record. The minister knows
perfectly well that someone in his position should authenticate every fact that
he alludes to in public discourse and not rely on second-hand material. And yet
he has made a very serious charge on the basis of a patently dodgy tweet,
identifying the JNU campus with anti-national activities backed by a terrorist organisation
in Pakistan.
Rajnath Singh’s party is
digitally literate. It lives and breathes social media. The police, which
answers to the home minister, has experts for analysing internet
communications. Rajnath Singh could have consulted them, but he preferred to
take a tweet allegedly from Saeed at face value. By being economical with his
concern for the truth, he has lit a fuse that has brought the excitement over
nationalism — the authorised version of the BJP — bursting out
of the campus into the public domain. On Monday, the police significantly stood
by while lawyers with BJP sympathies arbitrarily assaulted students, professors
and journalists at Delhi’s Patiala House courts, where JNU student leader Kanhaiya
Kumar’s case was heard. Consider the sequence of events. Colonial sedition law
was invoked to contain opinion on a famously leftwing campus. A fake tweet was
presented as verified truth to support the sedition case and when it was heard,
the court was turned into an arena. It is so bizarre that Rajnath Singh has
been advised to be responsible by Delhi Chief Minister Arvind Kejriwal. Indeed, his endorsement of a falsehood has
helped to launch a spate of mob violence fuelled by rumour-mongering, which
could go out of control.
rep·ri·mand
Rebuke
(someone), especially officially.
com·mem·o·ra·tion
Remembrance,
typically expressed in a ceremony.
attribution
Assigning some
quality or character to a person or thing; "the attribution of language to
birds"; "the ascription to me of honors I had not earned"
er·ro·ne·ous
Wrong;
incorrect.
ac·cus·ing
(of an
expression, gesture, or tone of voice) indicating a belief in someone's guilt
or culpability.
hail
Call out to
(someone) to attract attention.
sub·stan·ti·ate
Provide
evidence to support or prove the truth of.
with·draw
Remove or take
away (something) from a particular place or position.
al·lude
Suggest or call
attention to indirectly; hint at.
pat·ent·ly
Clearly;
without doubt.
dodg·y
Dishonest or
unreliable.
al·leg·ed·ly
Used to convey
that something is claimed to be the case or have taken place, although there is
no proof.
arbitrarily
Randomly: in a
random manner; "the houses were randomly scattered"; "bullets
were fired into the crowd at random"
as·sault
Make a physical
attack on.
en·dorse·ment
An act of
giving one's public approval or support to someone or something.
ru·mor
A currently
circulating story or report of uncertain or doubtful truth.
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