Local Area Banks[ LABs] were conceived by sri Chidambaram the then Finance Minister in united front government. Under this scheme LABs were allowed to be set up in various states at the rate of one LAB for one or a few contiguous districts.Private commercial banks operate as parallels to public sector banks competing with one another.On identical lines LABs were conceived as local banks to compete with Regional Rural Banks and co-operative banks thereby ensuring a competitive set up.The RBI issued detailed guidelines for establishing LABs.These guidelines contained licensing procedure,capital required and other details.
As many as 227 applications were received by RBI seeking licence to set up LABs.Out of them 214 applications were rejected on initial scrutiny itself.Only 10 applications were found suitable for in-principle clearance.But all ten applicants could not fulfill the requirements and conditions stipulated by RBI.Finally only five licences were issued by RBI for establishing LABs.out of them only four applicants utilised their licences and established LABs in India.The fifth bank viz Subhadra Local Area Bank has also come in to existence.But number of LABs got reduced to original 4 consequent on the merger of South Gujarat Local Area Bank with Bank of Baroda in June 2004 Other banks could not come in to being at alland the licences given for their establishment expired..
The four LABs that are in existence in India are the following-
!.Coastal Local Area Bank Ltd Vijayawada.
2..Coastal Local Area Bank Ltd Pagwara.
3Subhadra local Area Bank,Kolhapur.
4..Krishna Bheema Samridhi Local Area Bank Ltd,Mehboobnagar.
Local area banks established so far have not made adequate progress on any front. The existing LABs have about 35 branches with asset base of Rs 425 crores They have deposits and advances of Rs 330 crores and Rs 220 crores respectively.These banks are making moderate profits which are not adequate..They have not been able not create a niche for themselves so far.The main reasons for the inadequate progres of Labs is absence of long range plans and long range strategic vision.Also LAB concept could not get required support in India.Regionnal Rural Banks,sponsor banks,bank unions etc opposed the establishment of LABs.Because of wide spread opposition many promoters abandoned the idea of setting up their LABs.
The Ramachandran Study Group which examined the issue indicated that each LAB once it completes five years of operatin would require net owned funds of Rs.25 crores.It would be doubtful whether all promoters of LABs will be able to bring additionnal equity to augment NOF to that level.The Ramachandran Committee also recommended that no new licence for establishment of new LABs be given till existing LABs make adequate progress.
The LAB concept has thus failed to create any impact in India.Lack of encouragement ,lack of vision on the part of promoters,non-avilability of dynamic leaders to head the LABs etc were the reasons for the failure of LABs.Given the necessary support ,encouragement and dynamism of promoters and top management of LABs they would have surely made their mark as efiicient and performing banking entities in private sector.They would have effectively competed with RRBs and co-operative banks.The concept should have been given full trial instead of discarding it on the basis of half -hearted experiment.Now it is suggested that small finance banks be set up.It is better to give a full trial to LAB concept before venturing into the concept of small finance bank.
Saturday, May 31, 2008
Thursday, May 29, 2008
Get Rid Of Inferiority Complex
Inferiority complex is nothing but a mental condition which makes a person think that he or she is not as good as someone else and his competence is much less and can not do certain tasks .A person might have developed inferiority complex as result of certain event or happening in the distant past or in his childhood or he might have some physical defects or deficiencies which may make him think that he is inferior to others.
FALSE FEELING
Inferiority complex may emerge from the feeling that others are constantly observing us and watching our activities .Beacause of such feeling many are scared to take up any new initiative or new tasks for fear of failure .Many are scared to venture into any new activities or new fields for fear of criticism by others if they do not do well .Such fear alone prevents many from developning their talents in many fields like music,dance,public speaking etc.
The fear that others are constantly watching us our mistakes and defects and they may publicise our failures and mistakes thereby tarnishing our name is nothing but imaginery.This is a false feeling.Every person has his own problems and he has no time to focus on others' failures and mistakes.
FACE FACTS
An important rule in getting rid of inferiority complex is to face the facts as they are.We must understand that the reality can not be changed in a vast majority of cases.Hence we must face facts boldly and in a spirit of challenge.A person may be having deafness which is beyond rectification.One may have developed shortening of leg due to operation following an accident.Instaed of worrying about such things we have face the same.Thomas Alva Edison had deafness.Rooevelt was affected by polio in his childhood.He aws fully aware of this.He faced this boldly and became US President.Napoleon Was short and had no good personality.He achieved so much inspite of this defect.Lal Bhadur Shastry was short .But he became a man of great stature.He was India's Prime Minister.
By accepting that facts can not be changed and also by facing the facts as a challenge we can do well in any field and excel.In history and also in puranas we have many examples of individuals who have achieved supreme success in spite of their physical defects and shortcomings.
DISPLAY STRENGTHS
The way out is to conceal defects and shortcomings and display strengths.Every person has some talent,some strength.,some gift given by God.A daef may be very good in singing.Ashtavakra had very poor personality and his body had eight bendings.All thae same he was a wonderful singer .Even queen was attracted by his singing.Hence everyone must discover his strength,hidden talent and display the same.Try to discover your latent talent,bring it to surface and then develop it.A person who has lost his eyes may be good in painting or singing.A deaf may become a great enrepreneur and later on a great industrialist too..Thus every one must hide his or her defects and display strengths and talents.This approach will help us in overcoming inferiority complex by and by and ultimately we can get rid rid of the same
FALSE FEELING
Inferiority complex may emerge from the feeling that others are constantly observing us and watching our activities .Beacause of such feeling many are scared to take up any new initiative or new tasks for fear of failure .Many are scared to venture into any new activities or new fields for fear of criticism by others if they do not do well .Such fear alone prevents many from developning their talents in many fields like music,dance,public speaking etc.
The fear that others are constantly watching us our mistakes and defects and they may publicise our failures and mistakes thereby tarnishing our name is nothing but imaginery.This is a false feeling.Every person has his own problems and he has no time to focus on others' failures and mistakes.
FACE FACTS
An important rule in getting rid of inferiority complex is to face the facts as they are.We must understand that the reality can not be changed in a vast majority of cases.Hence we must face facts boldly and in a spirit of challenge.A person may be having deafness which is beyond rectification.One may have developed shortening of leg due to operation following an accident.Instaed of worrying about such things we have face the same.Thomas Alva Edison had deafness.Rooevelt was affected by polio in his childhood.He aws fully aware of this.He faced this boldly and became US President.Napoleon Was short and had no good personality.He achieved so much inspite of this defect.Lal Bhadur Shastry was short .But he became a man of great stature.He was India's Prime Minister.
By accepting that facts can not be changed and also by facing the facts as a challenge we can do well in any field and excel.In history and also in puranas we have many examples of individuals who have achieved supreme success in spite of their physical defects and shortcomings.
DISPLAY STRENGTHS
The way out is to conceal defects and shortcomings and display strengths.Every person has some talent,some strength.,some gift given by God.A daef may be very good in singing.Ashtavakra had very poor personality and his body had eight bendings.All thae same he was a wonderful singer .Even queen was attracted by his singing.Hence everyone must discover his strength,hidden talent and display the same.Try to discover your latent talent,bring it to surface and then develop it.A person who has lost his eyes may be good in painting or singing.A deaf may become a great enrepreneur and later on a great industrialist too..Thus every one must hide his or her defects and display strengths and talents.This approach will help us in overcoming inferiority complex by and by and ultimately we can get rid rid of the same
Saturday, May 24, 2008
BANKING ON CHANGE
Indian banking hs so far moved through five distinct stages.The first stage covering the period from 1900 to 1950 saw series of births of new banks and series of bank failures.This period also saw the birth of Reserve Bank of India,the monitor of banking system and enactment of Banking Regulation Act in 1949 giving powers to RBI to regulate supervise and develop banking system in India.
During 1950s and 1960s i.e in the the second stage efforts were directed at laying the foundation for a sound banking system in India.This stage also saw the development of necessary legislative frame work for facilitating the re-organisation and consolidation of the banking system for meeting the requirements of Indian economy.Transformation of Imperial Bank in to State Bank of India and redefinition of its role in Indian economy were the major developments during this period.
The third stage was the expansion stage.Expansion initiated in the mid-sixties gained momentum after nationalisation of 14 major banks in 1969 and got further intensified after the take-over of 6 more banks in 1980.The fourth satge which began in 1985 was the stage of consolidation.During this stage efforts were made to address the weaknesses noticed in the banking system as a consequence of speedy expansion.This period saw a marked slow-down in the expansion of branch network.Attention was paid to the improvement of house-keeping,customer service,credit management rationalistaion of interest rates,on deposits and advances,profitability,staff productivity etc.
Next came the stage of reforms.The macro economic crisis which was faced by India in 1991 paved the way for extensive financial sector reforms.Inspite of the impressive expansion of the banking system in the earlier stages Indian banking system was found financially weak and some of the banks had already become unprofitable and under-capitalised with high level of non-performing assets.
A significant development during the reforms stage was complete deregulation of interest rates both in respect of deposits and advances except for small loans up to Rs.2 lakhs.An important fall-out of deregulation of interest rates has been total change in approach to mannagement and governance of banks.Pricing of loans became free and as result banks have to develop a risk evaluation model for assets acquired by them.Different risks have to be identified,categorised and appropriately priced instead of being offered at a common cost plus price.In the emerging scenario banks have to shift their focus from process based management to risk based management.
Another important measure introduced in the reforms stage has been easing of norms for the entry of new players into the banking field.As result there has been significant increase in the number of private banks and number of foreign bank branches .Now there is a competitive set up in banking sector.New private banks have sensitised ordinary users of banking products and services and made them more and more quality conscious.As a result market for banking services has become buyers market.
As result f reforms there has been blurring of distinction between banks and financial institutions in India.Now there is increased accent on universal banking.In these days of virtual banking a vast network of branches which was a mesure of size and strength in the past may not remain so.Banks have to strive hard to build up themselves as strong and sound institutions and produce better and stronger balance sheets.THE MAJOR DEVELOPMENTS IN POST REFORM PERIOD INCUDED THE FOLLOWING-
1.Shift of emhasis to risk management and asset liability management on scientific and efficient lines.2Significant improvement in capiatl adequacy ratios of banks and also in profitability and productivity.3. Significant decline in NPA rates in all banks.4.Integration of financial markets in India.5.Better and higher provisioning for bad and doubtful debts and also provision of 1percent for standard assets.6.Introduction of loan review mechanism.7Establishment of asset reconstruction company.8Incresed disclosures to ensure transparency.9Enactment of SARFAESI ACT.10.Establishment of debt recovery tribunals.11.Implementation of competition enhancing measures such as opening of new private banks,market role enhancing steps such as reduction in SLR and other reserve requirements,introduction of pure inter bank call money market,auction based repos and reverse reposfor short term liquidity management,and prudential measures such as international best practices and norms on risk weighted acpital adequacy,management,accounting,income recognition,provisioning and exposure norms.12.Emegence of universal banking.13.Inforamtion technology revolution.14.Risk based supervision.15.new basel accord.16.corporate governance.17.Financial Inclusion.18.new bank licensing and branch licensing policies.19Permission to banks to access capital from the market up to 49 percent.20 Dismantling of BSRBs.
In my view future of Indian banking lies in rural sector the potential of which ahs not been fully exploted so far.Banks have to focus increasingly on ruarl operations in order to tap the rural business potential in the days to come.Bnaks must have claer vision of emerging challenges.
[Source-Bhavan's Journal dated 30th September 2001]
During 1950s and 1960s i.e in the the second stage efforts were directed at laying the foundation for a sound banking system in India.This stage also saw the development of necessary legislative frame work for facilitating the re-organisation and consolidation of the banking system for meeting the requirements of Indian economy.Transformation of Imperial Bank in to State Bank of India and redefinition of its role in Indian economy were the major developments during this period.
The third stage was the expansion stage.Expansion initiated in the mid-sixties gained momentum after nationalisation of 14 major banks in 1969 and got further intensified after the take-over of 6 more banks in 1980.The fourth satge which began in 1985 was the stage of consolidation.During this stage efforts were made to address the weaknesses noticed in the banking system as a consequence of speedy expansion.This period saw a marked slow-down in the expansion of branch network.Attention was paid to the improvement of house-keeping,customer service,credit management rationalistaion of interest rates,on deposits and advances,profitability,staff productivity etc.
Next came the stage of reforms.The macro economic crisis which was faced by India in 1991 paved the way for extensive financial sector reforms.Inspite of the impressive expansion of the banking system in the earlier stages Indian banking system was found financially weak and some of the banks had already become unprofitable and under-capitalised with high level of non-performing assets.
A significant development during the reforms stage was complete deregulation of interest rates both in respect of deposits and advances except for small loans up to Rs.2 lakhs.An important fall-out of deregulation of interest rates has been total change in approach to mannagement and governance of banks.Pricing of loans became free and as result banks have to develop a risk evaluation model for assets acquired by them.Different risks have to be identified,categorised and appropriately priced instead of being offered at a common cost plus price.In the emerging scenario banks have to shift their focus from process based management to risk based management.
Another important measure introduced in the reforms stage has been easing of norms for the entry of new players into the banking field.As result there has been significant increase in the number of private banks and number of foreign bank branches .Now there is a competitive set up in banking sector.New private banks have sensitised ordinary users of banking products and services and made them more and more quality conscious.As a result market for banking services has become buyers market.
As result f reforms there has been blurring of distinction between banks and financial institutions in India.Now there is increased accent on universal banking.In these days of virtual banking a vast network of branches which was a mesure of size and strength in the past may not remain so.Banks have to strive hard to build up themselves as strong and sound institutions and produce better and stronger balance sheets.THE MAJOR DEVELOPMENTS IN POST REFORM PERIOD INCUDED THE FOLLOWING-
1.Shift of emhasis to risk management and asset liability management on scientific and efficient lines.2Significant improvement in capiatl adequacy ratios of banks and also in profitability and productivity.3. Significant decline in NPA rates in all banks.4.Integration of financial markets in India.5.Better and higher provisioning for bad and doubtful debts and also provision of 1percent for standard assets.6.Introduction of loan review mechanism.7Establishment of asset reconstruction company.8Incresed disclosures to ensure transparency.9Enactment of SARFAESI ACT.10.Establishment of debt recovery tribunals.11.Implementation of competition enhancing measures such as opening of new private banks,market role enhancing steps such as reduction in SLR and other reserve requirements,introduction of pure inter bank call money market,auction based repos and reverse reposfor short term liquidity management,and prudential measures such as international best practices and norms on risk weighted acpital adequacy,management,accounting,income recognition,provisioning and exposure norms.12.Emegence of universal banking.13.Inforamtion technology revolution.14.Risk based supervision.15.new basel accord.16.corporate governance.17.Financial Inclusion.18.new bank licensing and branch licensing policies.19Permission to banks to access capital from the market up to 49 percent.20 Dismantling of BSRBs.
In my view future of Indian banking lies in rural sector the potential of which ahs not been fully exploted so far.Banks have to focus increasingly on ruarl operations in order to tap the rural business potential in the days to come.Bnaks must have claer vision of emerging challenges.
[Source-Bhavan's Journal dated 30th September 2001]
Friday, May 16, 2008
ANOTHER FIRST OF AMMANNAYA
In his article titled''Regional Rural Bnaks On the Horns of a Dilemma''published in Fortune India dated July 16-31,1993 Dr Ammannaya recommended state-wise and sponsor bank - wise merger of RRBs He was the first to make this suggestion and the subsequent mergers of RRBs were on this basis only.
FINANCIAL INCLUSION FOR INCLUSIVE GROWTH
Inclusive growth is very vital from the point of view of national unity, social cohesion and peaceful living by all. Inclusive growth is possible only if all citizens are enabled to participate in growth procees and derive the benefit of growth.Financial inclusion being a vital part of overall inclusion could contribute significantly to economic progress and well-being of all citizens in the country
The committee on fiancial inclusion headed by Dr .C.Rangarajan has submitted its report a few months ago. The common perception is that financial inclusion of a person or household is complete once the person or a representative of the household opens a savings bank account or no-frills account with a bank branch. Financial inclusion can not be reduced to the ritual of mere opening of no-frills accounts by the financially excluded.Meaningful financial inclusion is achieved only when all accont holders learn the banking habit,the manner of using banking products and services,profitable use of bank credit etc and get in to the saving habit.Financial inclusion can be complete only when all those who are freshly brought in to banking fold are brought in to the main stream of economic and financial life
The committee on financial inclusion has defined financial inclusion as ''the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost''
Financial inclusion has not only deposit aspect and service aspect but also crdit aspect.The financially excluded must be brought in to the fold of banking and finance to get access to all types of financial services and banking products including bank credit. Development of saving and banking habit,education regarding the use of credit profitably the manner in which financial assets can be aquired and enjoyed,etc must be learnt by the newly included.Financial literacy has to be promoted and developed among the newly included so as to make their inclusion meaningful to them.By and by they must be made to learn investments also.Obtaining life insurance cover ,investment in mutual funds etc are also necessary at a later stage Financial literacy and credit counselling centres[FLCCs] if set up as suggested by RBI the same will go a long way in promoting financial literacy The said council can also educate people regarding the manner in which credit can be obtained from banks,how credit can be used profitably,how to sevice the loan by payment of instalments and interest on time,how to remain creditworthy and be eligble for credit from banks next time etc.
All the above aspects are vital from the point of view of meaningful financial inclusion.The importance of financial inclusion acn hardly be overstreesd.At present about 46 million farmer households in the country accounting for 51.4 percent of total farming families are in no position to access credit either from institutional or non-institutional sources.About 22percent borrow from informal sources and about 27 percent obtain credit from formal sources.In the north eastern region and eastern region only 4 percent and 9 percent respectively obtain credit from formal sources.
Many people suffer for want of basic knowledge regarding finance and credit that can be had from banks.Farmers and others in rural India boroww from money lenders at very high rates of interest and remain in debt throuhout their lives.Farmer suicides are constanly on the increase and many of these suicides were because of debts from informal sources at very high rates of interest.
In view of the above situation building up and expansion of an inclusive financial sector is absolutely necessary for bringing about more and more inclusiveness in growth. Financial inclusion has many components.The most important components of financial inclusion are the following
DEPOSITS-Opening of savings bank account is the starting point in financial inclusion.People who open savings bank accounts or no-frills accounts must not be left then and there.Follow up for operations in the account from time time and persuading them to credit their surplusses if any to the account is considered important.Banks can pursue the matter with such new customers and collect their savings if any in the form of small fixed deposits also.Dr.T.M.A.Pai launched the pigmy scheme in Syndicate Bank in 1928 to collect small and tiny savings of people at their door-steps.Pigmy can be an effective weapon of financial inclusion.In this manner the newly included can be taught savings habit,and manner of acquiring financial assets however sammall they may be.People getting manthly income can be persuaded to open recurring deposit accounts and contribute to the same every month.At the end of the period of the account on its maturity they may be persuaded to keep the amount in fixed deposit.
CREDIT--Bank credit is a potent weapon of development.Farmers and others engaged in productive activities may be tutored and educated regarding the ways of obtaining bank credit and utilising credit for productive purposes.Once they obtain credit they must be advised how to service the loan by paying instalments and interest on time and how to increse credit worthiness for getting more credit later on if required etc.
FINANCIAL LITERACY--Fiance is a subject which can not be learnt easily.It requires constant tutoring.The proposed financial literacy and credit counselling centres [FLCCs]are eminently suited for this job.The state governments and banks may bring out small book-lets in regional languages on finance and credit for the purpose of educating the lay people
Rangarajan committe has also recommended effecting improvements witin existing formal credit delivery mechanism.It has suggested methods for improving credit absorption capacity especially amongst the marginal and sub-marginal farmers and poor non-cultivator households.The committee has also recommended evolving new methods for effective out-reaching and leveraging on technology based solutions.
The committee has recommended the launching of National Financail Inclusion Plan.
The plan must aim at achieving the target of providing access to comprehensive financial services including credit to at least to 50 percent of financially excluded households [55.7 million]by 2012through rural and semi-urban branches of commercial banks and regional rural banks.The remaining 50 percent has to be covered by 2015.
The national plan must be broken in to state wise plans and district wise plans for achieving full inclusion.The committee has indicated that each branch may have a target of covering 250 new cultivator and non -cultivator households per annum.According to the committee stress should be on financing marginal farmers,tenant cultivators,and poor non-cultivator households.
A planned approach as suggested by the committee will help achieve definite results according to a time frame.
The committee has recommended that a Natioanl Mission On Financail Inclusion be constituted for achieving universal financial inclusion within a specific time frame and for suggesting policy initiatives and policy changes required for achieving desired level mof financial inclusion and for supporting a range of stake holders in public,private and NGO sectors.
The excluded segments are to be covered via designed products in the ares of savings,credit and other financial assets and life insurance.
The committee has suggested starting of special funds to help launch some of the suggested initiatives such as setting up of farmers service centres,,rural entreprenership development,and self employment training institutes ,self help group and technology applications for greater financial inclusion.The committeehas also suggested simplifications of procedures to the extent possible.
The implementation of the recommendations of the committee on fiancail inclusion will surely go a long way in achieving fiancial inclusion in the country.Promotion of financial literacy is an indispensible basis for meaningful and successful financial inclusion.Hence RBi and government must give full attention and importance to this task.Setting up of FLCCs will surely help promote financial literacy amongst the people newly brought in to the banking fold.State governments and district administarion must also play an important role in promoting financail literacy amongst people.Publication and distribution of book-lets on the subject of finance and banking in regional languages,by banks and state governments etc can be done to promote financial literacy.
.
The committee on fiancial inclusion headed by Dr .C.Rangarajan has submitted its report a few months ago. The common perception is that financial inclusion of a person or household is complete once the person or a representative of the household opens a savings bank account or no-frills account with a bank branch. Financial inclusion can not be reduced to the ritual of mere opening of no-frills accounts by the financially excluded.Meaningful financial inclusion is achieved only when all accont holders learn the banking habit,the manner of using banking products and services,profitable use of bank credit etc and get in to the saving habit.Financial inclusion can be complete only when all those who are freshly brought in to banking fold are brought in to the main stream of economic and financial life
The committee on financial inclusion has defined financial inclusion as ''the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost''
Financial inclusion has not only deposit aspect and service aspect but also crdit aspect.The financially excluded must be brought in to the fold of banking and finance to get access to all types of financial services and banking products including bank credit. Development of saving and banking habit,education regarding the use of credit profitably the manner in which financial assets can be aquired and enjoyed,etc must be learnt by the newly included.Financial literacy has to be promoted and developed among the newly included so as to make their inclusion meaningful to them.By and by they must be made to learn investments also.Obtaining life insurance cover ,investment in mutual funds etc are also necessary at a later stage Financial literacy and credit counselling centres[FLCCs] if set up as suggested by RBI the same will go a long way in promoting financial literacy The said council can also educate people regarding the manner in which credit can be obtained from banks,how credit can be used profitably,how to sevice the loan by payment of instalments and interest on time,how to remain creditworthy and be eligble for credit from banks next time etc.
All the above aspects are vital from the point of view of meaningful financial inclusion.The importance of financial inclusion acn hardly be overstreesd.At present about 46 million farmer households in the country accounting for 51.4 percent of total farming families are in no position to access credit either from institutional or non-institutional sources.About 22percent borrow from informal sources and about 27 percent obtain credit from formal sources.In the north eastern region and eastern region only 4 percent and 9 percent respectively obtain credit from formal sources.
Many people suffer for want of basic knowledge regarding finance and credit that can be had from banks.Farmers and others in rural India boroww from money lenders at very high rates of interest and remain in debt throuhout their lives.Farmer suicides are constanly on the increase and many of these suicides were because of debts from informal sources at very high rates of interest.
In view of the above situation building up and expansion of an inclusive financial sector is absolutely necessary for bringing about more and more inclusiveness in growth. Financial inclusion has many components.The most important components of financial inclusion are the following
DEPOSITS-Opening of savings bank account is the starting point in financial inclusion.People who open savings bank accounts or no-frills accounts must not be left then and there.Follow up for operations in the account from time time and persuading them to credit their surplusses if any to the account is considered important.Banks can pursue the matter with such new customers and collect their savings if any in the form of small fixed deposits also.Dr.T.M.A.Pai launched the pigmy scheme in Syndicate Bank in 1928 to collect small and tiny savings of people at their door-steps.Pigmy can be an effective weapon of financial inclusion.In this manner the newly included can be taught savings habit,and manner of acquiring financial assets however sammall they may be.People getting manthly income can be persuaded to open recurring deposit accounts and contribute to the same every month.At the end of the period of the account on its maturity they may be persuaded to keep the amount in fixed deposit.
CREDIT--Bank credit is a potent weapon of development.Farmers and others engaged in productive activities may be tutored and educated regarding the ways of obtaining bank credit and utilising credit for productive purposes.Once they obtain credit they must be advised how to service the loan by paying instalments and interest on time and how to increse credit worthiness for getting more credit later on if required etc.
FINANCIAL LITERACY--Fiance is a subject which can not be learnt easily.It requires constant tutoring.The proposed financial literacy and credit counselling centres [FLCCs]are eminently suited for this job.The state governments and banks may bring out small book-lets in regional languages on finance and credit for the purpose of educating the lay people
Rangarajan committe has also recommended effecting improvements witin existing formal credit delivery mechanism.It has suggested methods for improving credit absorption capacity especially amongst the marginal and sub-marginal farmers and poor non-cultivator households.The committee has also recommended evolving new methods for effective out-reaching and leveraging on technology based solutions.
The committee has recommended the launching of National Financail Inclusion Plan.
The plan must aim at achieving the target of providing access to comprehensive financial services including credit to at least to 50 percent of financially excluded households [55.7 million]by 2012through rural and semi-urban branches of commercial banks and regional rural banks.The remaining 50 percent has to be covered by 2015.
The national plan must be broken in to state wise plans and district wise plans for achieving full inclusion.The committee has indicated that each branch may have a target of covering 250 new cultivator and non -cultivator households per annum.According to the committee stress should be on financing marginal farmers,tenant cultivators,and poor non-cultivator households.
A planned approach as suggested by the committee will help achieve definite results according to a time frame.
The committee has recommended that a Natioanl Mission On Financail Inclusion be constituted for achieving universal financial inclusion within a specific time frame and for suggesting policy initiatives and policy changes required for achieving desired level mof financial inclusion and for supporting a range of stake holders in public,private and NGO sectors.
The excluded segments are to be covered via designed products in the ares of savings,credit and other financial assets and life insurance.
The committee has suggested starting of special funds to help launch some of the suggested initiatives such as setting up of farmers service centres,,rural entreprenership development,and self employment training institutes ,self help group and technology applications for greater financial inclusion.The committeehas also suggested simplifications of procedures to the extent possible.
The implementation of the recommendations of the committee on fiancail inclusion will surely go a long way in achieving fiancial inclusion in the country.Promotion of financial literacy is an indispensible basis for meaningful and successful financial inclusion.Hence RBi and government must give full attention and importance to this task.Setting up of FLCCs will surely help promote financial literacy amongst the people newly brought in to the banking fold.State governments and district administarion must also play an important role in promoting financail literacy amongst people.Publication and distribution of book-lets on the subject of finance and banking in regional languages,by banks and state governments etc can be done to promote financial literacy.
.
Monday, May 12, 2008
PRICING BY PERSUASION
Moral persuasion by the government has brought about some reduction in steel prices.It may work in respect of cement and other commodities also.But the long term solution which is most enduring will be augmentation of supplies through capacity expansion and augmentation of production.This is true of all commodities including agricultural goods and manufactured articles.For moral suasion to be effective it must be supported by enabling legislation.But the amendments proposed such as amendment to Mining Act,and Land Acquisition act etc are pending and would perhaps be taken up only in the monsoon session of the parliament.
By far the most effective weapon that can be employed to control inflation and price rise is augmentation of supplies and elimination of mismatch as between demand and supply.When supplies are in plenty producers and sellers will compete on the basis of prices to sell more.With acute competition among producers and suppliers black marketing will stand discouraged.The focus must thus be on augmentation of production of all articles and commodities.For this availability of bank credit at low rates of interest is vital.The RBI can advise banks to increase credit for production of all commodities and credit for expansion of capacities and also for production of manufactured goods.
The central bank could even advise banks to curtail and even resort to rationing of credit for non-essential consumption.Such a strategy will help expand production ensure growth and combat inflation simultaneously.For the present package approach may be required.But in the long run augmenting supplies,and creating a situation of abundance is absolutely essential.
[Published in Business Line dated 12th May,2008]
By far the most effective weapon that can be employed to control inflation and price rise is augmentation of supplies and elimination of mismatch as between demand and supply.When supplies are in plenty producers and sellers will compete on the basis of prices to sell more.With acute competition among producers and suppliers black marketing will stand discouraged.The focus must thus be on augmentation of production of all articles and commodities.For this availability of bank credit at low rates of interest is vital.The RBI can advise banks to increase credit for production of all commodities and credit for expansion of capacities and also for production of manufactured goods.
The central bank could even advise banks to curtail and even resort to rationing of credit for non-essential consumption.Such a strategy will help expand production ensure growth and combat inflation simultaneously.For the present package approach may be required.But in the long run augmenting supplies,and creating a situation of abundance is absolutely essential.
[Published in Business Line dated 12th May,2008]
Thursday, May 1, 2008
MONETARY POLICY_---2008-2009
The monetary policy staement for 2008-2009 annonced by RBI has come out with ceratin policy innovations apart from initiating measures aimed at combating inflation.
The RBI has again hiked CRR by 0.25 percent.If we take in to account the earlier hike of 0.50 percent the aggregate hike in CRR is as high as 0.75 percent.As a result liquidity amounting to Rs 28000croes will stand withdrawn from the banking system.The liquidity tightening exercise will result in increase in lending rates if not immediately ,a little later,and bring about depreciation in the value of Rupee against dollar and other currencies.The RBI has been pursuing dear money policy for sometime now.The RBI measure will push up cost of production and cost of bank finance.RBI has failed to distinguish bank credit meant for production and credit that will be used for consumption,particularly non-essenrtial consumption.As a result of hike in CRR interest rate on all bank loans regardles of whether they are loans meant for production or unwanted consumption will go up if not immediately at least a little later.Increase in the cost of bank finance will discourage capacity expansion so necessary for increasing production and augmenting supplies.Inflation that is galloping today is on account of supply-side constraints and not because of excess demand.Instaed the RBI must have hiked rates of interest only for loans that will be used for non-essential and unwanted consumption.A cheap money policy could have been adopted in respect of loans meant for production and capacity building for ensuring augmentation of supplies.
Alternatively the RBI could have resorted to traditional MORAL SUASION.This is a traditional weapon of credit control.RBI could have issued direction and advice to banks to curtail credit for non-essential consumption alone.Production credit and credit for agriculture must be continued at cheaper rates of interest.This approach would have ensured growth and helped in controlling inflation simultaneously.
The monetary policy statement contains a few new initiatives which are indeed welcome.The decision of RBI to introduce mobile banking later this year is a good initiative and the same will go a long way in ensuring more and more inclusive banking in India.This is also a low cost channel and will be convenient for both banks and customers.However needed safeguards must be put in place by adequately addreesing issues of security,money laundering issues etc.The policy has attempted adjustment of regulatory policy to make financial products more efficient.It seeks to liberalise outward investments by hiking limits for spendings for acquiring energy and natural resource assets abroad by companies .Such a move will have salutory impact on the swelling foreign exchange reserves which are imposing some cost on Indian economy.Another innovative inintiative is relating to securitisation of priority sector loans.Under this arrangement scheduled commercial banks can buy priority sector loans from RRBs.RBI has also incresed housing loan limit with risk weight of 50 from the present Rs 20 lakhs to Rs 30 lakhs.This will encourage banks to continue lending to housing sector in a big way which will in turn help certain sectors of the economy to grow in the days to come.The advice of RBI to banks to review and curtail lending against warehouse receipts and also aginst commodities is also a welcome step.In a nutshel the new policy statement has gone much beyond inflation fighting perspective of the old towards novel ways of liberalisation,innovation in fiancing and novel financial growth
The RBI has again hiked CRR by 0.25 percent.If we take in to account the earlier hike of 0.50 percent the aggregate hike in CRR is as high as 0.75 percent.As a result liquidity amounting to Rs 28000croes will stand withdrawn from the banking system.The liquidity tightening exercise will result in increase in lending rates if not immediately ,a little later,and bring about depreciation in the value of Rupee against dollar and other currencies.The RBI has been pursuing dear money policy for sometime now.The RBI measure will push up cost of production and cost of bank finance.RBI has failed to distinguish bank credit meant for production and credit that will be used for consumption,particularly non-essenrtial consumption.As a result of hike in CRR interest rate on all bank loans regardles of whether they are loans meant for production or unwanted consumption will go up if not immediately at least a little later.Increase in the cost of bank finance will discourage capacity expansion so necessary for increasing production and augmenting supplies.Inflation that is galloping today is on account of supply-side constraints and not because of excess demand.Instaed the RBI must have hiked rates of interest only for loans that will be used for non-essential and unwanted consumption.A cheap money policy could have been adopted in respect of loans meant for production and capacity building for ensuring augmentation of supplies.
Alternatively the RBI could have resorted to traditional MORAL SUASION.This is a traditional weapon of credit control.RBI could have issued direction and advice to banks to curtail credit for non-essential consumption alone.Production credit and credit for agriculture must be continued at cheaper rates of interest.This approach would have ensured growth and helped in controlling inflation simultaneously.
The monetary policy statement contains a few new initiatives which are indeed welcome.The decision of RBI to introduce mobile banking later this year is a good initiative and the same will go a long way in ensuring more and more inclusive banking in India.This is also a low cost channel and will be convenient for both banks and customers.However needed safeguards must be put in place by adequately addreesing issues of security,money laundering issues etc.The policy has attempted adjustment of regulatory policy to make financial products more efficient.It seeks to liberalise outward investments by hiking limits for spendings for acquiring energy and natural resource assets abroad by companies .Such a move will have salutory impact on the swelling foreign exchange reserves which are imposing some cost on Indian economy.Another innovative inintiative is relating to securitisation of priority sector loans.Under this arrangement scheduled commercial banks can buy priority sector loans from RRBs.RBI has also incresed housing loan limit with risk weight of 50 from the present Rs 20 lakhs to Rs 30 lakhs.This will encourage banks to continue lending to housing sector in a big way which will in turn help certain sectors of the economy to grow in the days to come.The advice of RBI to banks to review and curtail lending against warehouse receipts and also aginst commodities is also a welcome step.In a nutshel the new policy statement has gone much beyond inflation fighting perspective of the old towards novel ways of liberalisation,innovation in fiancing and novel financial growth
PERFORMING LEADERSHIP_HOW TO ATTAIN IT
One hardly need to emphasise the role of effective leadership in all spheres of human activity.Leadership is not confined to politics alone ; it is relevant in each area of activity ,on every table in an office,and in every household.Man is a social being.No person can live alone and satisfy all his needs himself.That is why we find group activities and leaders are indispensible for the business of all group activities.We find groups of people in units like family,society,nation etc.At every level from from the family level to national level we need leaders for our success.
Any individual can become a leader by acquiring certain qualiyies .If we study the lives of great leaders like,Ganhiji,Nehruji,Sardar Patel,Indira Gandhi,Rajiv Gandhi ,Stalin,Roosevelt,Lincoln,Churchil and many others we find that they became graet leaders by their personal efforts ,by hard work,and through sacrifice.There are no born leaders.
TWO FACTORS
There are two vital factors which are essential for the success of leadership.They are-1.functional competence.and 2co-ordinating or general ability.Functinal competence implies knowledge of one's job,profession or vocation. A leader must have full knowledge of his chosen area of activity.If he is a doctor aiming at leadership in the field he must have full professional knowledge and he has to constantly keep his knowledge updated by reading medical books and journals.He must also attend professional seminars and conferences to gain knowledge.If he is a teacher and wants to be effective he has to study his subject well and he must also keep abreast of developments in the subject being taught by him.The same is true of all professionals,be they lawyers,chartered accountants,architectsor bankers.The second vital factor is co-ordinating or general ability which is much more important.The ability to co-ordinate,control and guide the activities and work of all individuals in the group the ability to bind the team,or group and the ability to bring about full involvement on the part of all members of the team or group are fundamental for the success of the leader.You can be definitely called upon to lead a group if you are able to influence the group and make it work in the manner you want.
IDEAS RULE
Adequate knowledge of the field or area of activity in which the leader seeks to provide leadership is also vey important.Ideas rule the world.An ignorant man who does not know what he needs may not be able to give effective leadership.He will miss the essentials and instaed cling to useless ,irrelevant and trivial things.For providing leadership you need not be master of everything.It is enough if you have rudimentary knowledge of various subjects.The process of providing leadership involves providing vision,and providing perspective.Therefore the leader must have vision and perspective.A leader need not know XYZ of all things.It is enough if he knows ABC of many things.With such rudimentary knowledge he can make further efforts and acquire further knowledge.
Ability to acquire knowledge depends upon one's grasp which can be sharpened through practice and experience.Grasp and absorption will be quick when you already have some knowledge.Your mind will be alert and you will be quick to absorb.Knowledge gained by wide reading,observation,association,interaction,with others and practical experience and exposure can be good sock of knowledge and this can be called practical intelligence.
PRACTICAL INTELLIGENCE
Practical intelligence is the competence to solve problems.Leaders and executives in leadershp positions need this practical intelligence.Experience,expsure,knowledge and imagination help us in developing practical intelligence.Once you build up practical intelligence within yourself you can form correct and appropriate judgement and take correct and sound decisions.
Adequate knowledge of your job is also very vital.You must have adequate knowledge of your job,,profession or chosen activity.Lack of knowledge will reduce your self- confidence .Poor knowledge,inefficiency,and ignorance will be a serious constraint to our leadership and the same will expose us to ready attack and criticism by rivals.If you are knowledgeable with no negative qualities attached to you others will admire you and come to you for guidance.Therefore for playing a leadership role effectively one must know his job and profession fully.There is no end to the process of learning.we must keep on learning and keep on addinng to to the existing stock of our knowledge.
KNOWING PEOPLE
Apart from knowledge about the job the leader must have knowledge about people he is seeking to lead.He must know people,very well.He must have some knowledge of psychology so as to be able to read the mind of people.Study of psychology will enable the leader to learn and understand human behaviour and the ways in which human-need-satisfaction and motivation can be achieved.As a leader he may have to deal with his superiors ,colleagues and juniors Hence he must learn the art of adaptation.He must learn to adjust himself to the needs and aspirations of all people.Each man has a separate and distinct personality and a point of view of his own.Different individuals will react differently to given situation.Therefore the more a leader knows his people the greater are the chances of his success as a leader.
CREDIBILTY and TRANSPARENCY
Alongside the above qualities a leader to be effective and successful on an enduring basis must also establish his credibilty.If a leader keeps his word and there is no gap between his preachings and doings and he conforms to norms ,rules,and values apart from advising others to show such conformity he will be able to establish his credibility.The leader must ensure that there is transparency in his functioning.The head of an institution like a bank or any other organisation must be transparent in his functioning .Many chief executives of banks in their public sppeeches say that they will follow presribed rules and norms and adopted policies in all matters including promotions.But when it comes to promotions they promote their own people or people who are close to them ignoring many other candidates with merit and good tarck record of performance.Through such action they lose their credibility.Credibility once lost is lost for ever.Leaders must therefore maintain their credibility at any cost.Leaders must also be bold and assertive in times of need and they must themselves take initiatives at the right time instaed of waiting for suggestions to come from below.Leaders who can strike iron when it is hot can achieve results.
PERFORMING LEADERSHIP
Successful leadership is that which absorbs ,builds up and maintains above vital factors and qualities.Such leadership will be an enlightened leadership having attained both functional competence and co-ordinating ability.It will be active,credible,responsible,value-based,and transparent leadership.Through concerted and consatnt efforts in that direction any individual can attain such leadership.
[Source-Canara Times dated 15th December 1996]
Any individual can become a leader by acquiring certain qualiyies .If we study the lives of great leaders like,Ganhiji,Nehruji,Sardar Patel,Indira Gandhi,Rajiv Gandhi ,Stalin,Roosevelt,Lincoln,Churchil and many others we find that they became graet leaders by their personal efforts ,by hard work,and through sacrifice.There are no born leaders.
TWO FACTORS
There are two vital factors which are essential for the success of leadership.They are-1.functional competence.and 2co-ordinating or general ability.Functinal competence implies knowledge of one's job,profession or vocation. A leader must have full knowledge of his chosen area of activity.If he is a doctor aiming at leadership in the field he must have full professional knowledge and he has to constantly keep his knowledge updated by reading medical books and journals.He must also attend professional seminars and conferences to gain knowledge.If he is a teacher and wants to be effective he has to study his subject well and he must also keep abreast of developments in the subject being taught by him.The same is true of all professionals,be they lawyers,chartered accountants,architectsor bankers.The second vital factor is co-ordinating or general ability which is much more important.The ability to co-ordinate,control and guide the activities and work of all individuals in the group the ability to bind the team,or group and the ability to bring about full involvement on the part of all members of the team or group are fundamental for the success of the leader.You can be definitely called upon to lead a group if you are able to influence the group and make it work in the manner you want.
IDEAS RULE
Adequate knowledge of the field or area of activity in which the leader seeks to provide leadership is also vey important.Ideas rule the world.An ignorant man who does not know what he needs may not be able to give effective leadership.He will miss the essentials and instaed cling to useless ,irrelevant and trivial things.For providing leadership you need not be master of everything.It is enough if you have rudimentary knowledge of various subjects.The process of providing leadership involves providing vision,and providing perspective.Therefore the leader must have vision and perspective.A leader need not know XYZ of all things.It is enough if he knows ABC of many things.With such rudimentary knowledge he can make further efforts and acquire further knowledge.
Ability to acquire knowledge depends upon one's grasp which can be sharpened through practice and experience.Grasp and absorption will be quick when you already have some knowledge.Your mind will be alert and you will be quick to absorb.Knowledge gained by wide reading,observation,association,interaction,with others and practical experience and exposure can be good sock of knowledge and this can be called practical intelligence.
PRACTICAL INTELLIGENCE
Practical intelligence is the competence to solve problems.Leaders and executives in leadershp positions need this practical intelligence.Experience,expsure,knowledge and imagination help us in developing practical intelligence.Once you build up practical intelligence within yourself you can form correct and appropriate judgement and take correct and sound decisions.
Adequate knowledge of your job is also very vital.You must have adequate knowledge of your job,,profession or chosen activity.Lack of knowledge will reduce your self- confidence .Poor knowledge,inefficiency,and ignorance will be a serious constraint to our leadership and the same will expose us to ready attack and criticism by rivals.If you are knowledgeable with no negative qualities attached to you others will admire you and come to you for guidance.Therefore for playing a leadership role effectively one must know his job and profession fully.There is no end to the process of learning.we must keep on learning and keep on addinng to to the existing stock of our knowledge.
KNOWING PEOPLE
Apart from knowledge about the job the leader must have knowledge about people he is seeking to lead.He must know people,very well.He must have some knowledge of psychology so as to be able to read the mind of people.Study of psychology will enable the leader to learn and understand human behaviour and the ways in which human-need-satisfaction and motivation can be achieved.As a leader he may have to deal with his superiors ,colleagues and juniors Hence he must learn the art of adaptation.He must learn to adjust himself to the needs and aspirations of all people.Each man has a separate and distinct personality and a point of view of his own.Different individuals will react differently to given situation.Therefore the more a leader knows his people the greater are the chances of his success as a leader.
CREDIBILTY and TRANSPARENCY
Alongside the above qualities a leader to be effective and successful on an enduring basis must also establish his credibilty.If a leader keeps his word and there is no gap between his preachings and doings and he conforms to norms ,rules,and values apart from advising others to show such conformity he will be able to establish his credibility.The leader must ensure that there is transparency in his functioning.The head of an institution like a bank or any other organisation must be transparent in his functioning .Many chief executives of banks in their public sppeeches say that they will follow presribed rules and norms and adopted policies in all matters including promotions.But when it comes to promotions they promote their own people or people who are close to them ignoring many other candidates with merit and good tarck record of performance.Through such action they lose their credibility.Credibility once lost is lost for ever.Leaders must therefore maintain their credibility at any cost.Leaders must also be bold and assertive in times of need and they must themselves take initiatives at the right time instaed of waiting for suggestions to come from below.Leaders who can strike iron when it is hot can achieve results.
PERFORMING LEADERSHIP
Successful leadership is that which absorbs ,builds up and maintains above vital factors and qualities.Such leadership will be an enlightened leadership having attained both functional competence and co-ordinating ability.It will be active,credible,responsible,value-based,and transparent leadership.Through concerted and consatnt efforts in that direction any individual can attain such leadership.
[Source-Canara Times dated 15th December 1996]
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