Sunday, July 20, 2008
New Article on Banking
A new article of Dr.K.K.Ammannaya has appeared in Southern Economist dated 15th July 2008.The title of the article is''Indian Banking-Post Reform Transformation and Future Challenges''
First doctorate from Mangalore university in Banking[Commerce]
Dr.K.K.Ammannaya was the first doctorate in Banking[Commerce]from Mangalore University.As the chairman of Varada Gramina Bank he achieved its magnificent turnaround.He wiped out accumulated losses and achieved large amount of net profit .BIRD Lucknow had made a case study regarding his banking experiments and achievements.Dr.Ammannaya also built own head office building for the bank.
Saturday, July 19, 2008
INCLUSIVE HOUSING--HOUSING MICRO FINANCE
Housing is not only a basic necessity but also an indicator of progress of the nation in terms of human development.All over the world housing is regarded as a means of long term wealth accumulation and financial security.Home ownership which is a matter of personal accomplishment can be the primary source of wealth for the people belonging to low and middle income groups.
According to NHB estimates additional housing requirements during the eleventh plan 2007-2012 are 45 million of which 38 million as additional units and seven million as backlog.Investment requirement for housing during eleventh plan will be Rs 10 lakh crores i.e Rs 2lakh crores per year.
The growthn of housing finance in India so far has been value-driven and not volume -driven.Loans of Rs 5 lakhs and above have increased significantly while loans below Rs 5 lakhs registered minimum growth.This reflects increased property prices.The coverage of housing finance system has by and large remained confined to metropolitan and urban areas as well as to high income and middle income groups thereby by-passing the lower income groups,rural poor and urban poor.In spite of significant growth in the housing finance market there still remains a huge gap in housing requirements of the poor and deprived sections of society.Share of rural housing has remained stagnant at 10.3 percent while share of metropolitan areasincreased significantly from 37.8 percent to 47.3 percent during the last 5 years.
The challenge before the nation is to arrange,facilitate catalyse,and manage required resources for investment in housing focussing on lower income categories and the urban and rural poor.The stress must therefore be on more and more inclusiveness and on building a market based inclusive,sustainable housing finance system.An inclusive housing finance system alone can tackle the problem of homelessness on the part of poorer sections of society.
Herein comes the importance of housing micro fianace.Micro finance can be a tool which can be effective in bringing about financial inclusion and in achieving affordable housing for all as laid down in the Nationalurban housing and habitat policy 2007.
Micro housing credit can be defined as an extension of micro finance to the poor for the purpose of fulfilling their housing needs .The key features of housing micro finance are-
quantum of Loan-The amount of loan will be 2to 4 times larger than the average micro credit loans.
Loan Period-2to 5years for home improvementand upto 10 years for house construction.
Credit Delivery-Loan is disbursed to individual borrower
Security for the loan-The property can be mortgaged if clear title and title deeds are available.Otherwise it will be a clean loan.Other forms of security like group guarantee,savings etc may be insisted upon.
Target Group-Poor people with means of repayment like artisans,rural entrepreneurs,craftsmenagricultural labourers rural hoteliers.people engaged in rural non-farm activities people engaged in rural services etc
Other features-Sometimes a productive loan is also offered to increase repayment capacity of the party under PHIRA scheme.
The issues involved in micro housing finance among others are viability of micro housing loans for banks and HFCs,non-availability of proper title deeds,in respect of property to be financed difficulty in getting group gurantee and other collaterals etc.These issues and risks acn be addressed to a great extent by adopting appropriate credit appraisal mechanism and proper selection of borrowers,capacity building among borrowers,by lending for productive purposes as a part and parcel of housing loan.Micro insurance may also be of some help in addressing these issues.It is necessary to ensure satisfactory corporate governance in micro finance institutions.Flexible funding mechanism is necessary.There is also need for co-ordination between formal credit institutions to prevent excess geographical concentration and to develop housing micro finance as a standardised product.
According to NHB estimates additional housing requirements during the eleventh plan 2007-2012 are 45 million of which 38 million as additional units and seven million as backlog.Investment requirement for housing during eleventh plan will be Rs 10 lakh crores i.e Rs 2lakh crores per year.
The growthn of housing finance in India so far has been value-driven and not volume -driven.Loans of Rs 5 lakhs and above have increased significantly while loans below Rs 5 lakhs registered minimum growth.This reflects increased property prices.The coverage of housing finance system has by and large remained confined to metropolitan and urban areas as well as to high income and middle income groups thereby by-passing the lower income groups,rural poor and urban poor.In spite of significant growth in the housing finance market there still remains a huge gap in housing requirements of the poor and deprived sections of society.Share of rural housing has remained stagnant at 10.3 percent while share of metropolitan areasincreased significantly from 37.8 percent to 47.3 percent during the last 5 years.
The challenge before the nation is to arrange,facilitate catalyse,and manage required resources for investment in housing focussing on lower income categories and the urban and rural poor.The stress must therefore be on more and more inclusiveness and on building a market based inclusive,sustainable housing finance system.An inclusive housing finance system alone can tackle the problem of homelessness on the part of poorer sections of society.
Herein comes the importance of housing micro fianace.Micro finance can be a tool which can be effective in bringing about financial inclusion and in achieving affordable housing for all as laid down in the Nationalurban housing and habitat policy 2007.
Micro housing credit can be defined as an extension of micro finance to the poor for the purpose of fulfilling their housing needs .The key features of housing micro finance are-
quantum of Loan-The amount of loan will be 2to 4 times larger than the average micro credit loans.
Loan Period-2to 5years for home improvementand upto 10 years for house construction.
Credit Delivery-Loan is disbursed to individual borrower
Security for the loan-The property can be mortgaged if clear title and title deeds are available.Otherwise it will be a clean loan.Other forms of security like group guarantee,savings etc may be insisted upon.
Target Group-Poor people with means of repayment like artisans,rural entrepreneurs,craftsmenagricultural labourers rural hoteliers.people engaged in rural non-farm activities people engaged in rural services etc
Other features-Sometimes a productive loan is also offered to increase repayment capacity of the party under PHIRA scheme.
The issues involved in micro housing finance among others are viability of micro housing loans for banks and HFCs,non-availability of proper title deeds,in respect of property to be financed difficulty in getting group gurantee and other collaterals etc.These issues and risks acn be addressed to a great extent by adopting appropriate credit appraisal mechanism and proper selection of borrowers,capacity building among borrowers,by lending for productive purposes as a part and parcel of housing loan.Micro insurance may also be of some help in addressing these issues.It is necessary to ensure satisfactory corporate governance in micro finance institutions.Flexible funding mechanism is necessary.There is also need for co-ordination between formal credit institutions to prevent excess geographical concentration and to develop housing micro finance as a standardised product.
Sunday, July 13, 2008
CORRUPTION AND INCLUSIVE GROWTH
India has 83rd rank in the corruption perception index and most members of Indian bureaucracy and politicians are so corrupt that they do not hesitate to take money even from the poorest of the poor and vulnerable sections of society.
The results of the survey conducted by Transparency India International[TTI] have established this beyond any doubt.The organisation has come out with the most shocking revelation that people below poverty line have paid Rs.883 crores to bureaucrats between November 2007 and January 2008 in order to get basic government services that are the legitimate right of all citizens.Taking bribe for such services is condemnable and intolerable.
Poor people have to pay more for everything now with the price rise and inflation and their purchasing power has fallen sharply.
Payment for each and every service including medical treatment in government hospitals and getting ration cards etc by way of bribe has further reduced their purchasing power.
The goal of government is inclusive growth.But by their acts of corruption and bribe-taking bureaucrats and politicians are achieving exclusive growth for themselves to the utter exclusion of the poor from the growth process.The process of inclusion in respect of corruption has now covered judges as well.Corruption in judiciary has now brought about complete denial of justice to the poor.A rich man can kill a poor man and with the help of judges and by paying money he can easily shift the allegation and blame for murder to a poor witness and get him jailed or even hanged.This is justice today.
Unless we strengthen enforcement of law including anti-corruption law and give adequate punishment to the corrupt regardless of their position or clout we can not reduce corruption.At this rate we can only achieve inclusive corruption instead of inclusive growth.
Using Right to Information Act and instituting a system of external accountability the government must take firm action against the corrupt.
[Source-Businessline dated 12th July,2008]
The results of the survey conducted by Transparency India International[TTI] have established this beyond any doubt.The organisation has come out with the most shocking revelation that people below poverty line have paid Rs.883 crores to bureaucrats between November 2007 and January 2008 in order to get basic government services that are the legitimate right of all citizens.Taking bribe for such services is condemnable and intolerable.
Poor people have to pay more for everything now with the price rise and inflation and their purchasing power has fallen sharply.
Payment for each and every service including medical treatment in government hospitals and getting ration cards etc by way of bribe has further reduced their purchasing power.
The goal of government is inclusive growth.But by their acts of corruption and bribe-taking bureaucrats and politicians are achieving exclusive growth for themselves to the utter exclusion of the poor from the growth process.The process of inclusion in respect of corruption has now covered judges as well.Corruption in judiciary has now brought about complete denial of justice to the poor.A rich man can kill a poor man and with the help of judges and by paying money he can easily shift the allegation and blame for murder to a poor witness and get him jailed or even hanged.This is justice today.
Unless we strengthen enforcement of law including anti-corruption law and give adequate punishment to the corrupt regardless of their position or clout we can not reduce corruption.At this rate we can only achieve inclusive corruption instead of inclusive growth.
Using Right to Information Act and instituting a system of external accountability the government must take firm action against the corrupt.
[Source-Businessline dated 12th July,2008]
Thursday, July 10, 2008
FIRST ARTICLE IN KANNADA
Dr.Ammannaya published his first article in Kannada in 1963 when he was in 9th standard in Rashtramatha a ,Kannada paper then being edited and published by Kadengodlu Shankar Bhat from Mangalore,Karnataka.He published his first English article in 1963.
Sunday, July 6, 2008
Latest Article of Dr.Ammannaya
The latest article of Dr.Ammannaya was-
''Financial Inclusion for Inclusive Growth''published in Southern Economist dated June15, June 2008.
''Financial Inclusion for Inclusive Growth''published in Southern Economist dated June15, June 2008.
RTGS and ITS UTILITY
The introduction of RTGS in Indian banking industry was indeed a major event .It represented a landmark in the evolution of payment and settlement mechanism.
An RTGS payment system is one in which payment instructions between banks are processed and settled individually and continuously throughout the day.Real time settlementis process is executed as soon as a request is received and responses are sent to participants immediatelythroughout the day.Gross setllement request is received and processed and transfer of funds and settlement are done on transaction basis and not on net basis.
RTGS membership can be of different types.The categories are-
A-RBI and all scheduled banks.
B-Primary dealers.
C-Scheduled banks and primary dealers participating in call money market.
D-Clearing houses and clearing agencies.
e-non-scheduled banks and other financial institutions.
The most important benefit of RTGS is that it reduces the risk involved in the payment system.Money is credited to the account of beneficiary instantly.RTGS requires large amount of liquidity as settlements are done on transaction basis .This may require intra-day funding and such funding is done by RBI.
Advantages-
1.Instant credit of money.2.Reduction in transaction cost.3.Reduced paper work.4Certainty and finality of payment.5.No fear of cheque bounces.6.Reduced risks of frauds.
Disadvantages-
1Non-availability of float money for banks.2.Reduced utilisation of working capital limits by banks on account pf prompt credit of money to their accounts.This will affect interest income of banks
An RTGS payment system is one in which payment instructions between banks are processed and settled individually and continuously throughout the day.Real time settlementis process is executed as soon as a request is received and responses are sent to participants immediatelythroughout the day.Gross setllement request is received and processed and transfer of funds and settlement are done on transaction basis and not on net basis.
RTGS membership can be of different types.The categories are-
A-RBI and all scheduled banks.
B-Primary dealers.
C-Scheduled banks and primary dealers participating in call money market.
D-Clearing houses and clearing agencies.
e-non-scheduled banks and other financial institutions.
The most important benefit of RTGS is that it reduces the risk involved in the payment system.Money is credited to the account of beneficiary instantly.RTGS requires large amount of liquidity as settlements are done on transaction basis .This may require intra-day funding and such funding is done by RBI.
Advantages-
1.Instant credit of money.2.Reduction in transaction cost.3.Reduced paper work.4Certainty and finality of payment.5.No fear of cheque bounces.6.Reduced risks of frauds.
Disadvantages-
1Non-availability of float money for banks.2.Reduced utilisation of working capital limits by banks on account pf prompt credit of money to their accounts.This will affect interest income of banks
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