BIRD Lucknow had made a case study regading the banking experiments and accomplishments of Dr.K.K.Ammannaya.Dr Ammannaya achieved magnificent turnaround of Varada Grameena Bank as its Chairman and wiped out its accumulated losses and achieved huge net profit.This was much before government provided additional capital to RRBs.
Dr Ammannaya also constructed own Head Office building for the bank.Tranga ,Kannada weekly has published a cover feature article regarding his achievements as Chairman of the bank.
Saturday, September 20, 2008
Improving Quality of Statistics
The importance of more accurate and reliable data can hardly be overemhasised.The Prime Minister Dr.Manamohan Singh has recently expressed concern over the inadequate quality of macro economic data.The quality and reliability of data in India are so poor that the statstical data are usually being referred to as ''superlative'' of lies.[lies,damn lies and statistics]
Incorrect and inaccurate data base provide a wrong basis for planning and decision making.Inaccurate data used for research purposes lead to incorrect and erroneous conclusions.There is therefore an urgent need to improve the qualty of macro economic data and ensure their availability with least time lag.States which gather data must give adequate importance to quality and speedy collection of data so that final data are available within at least six months.
In the case of data particularly data relating to GDP and GDP growth rate the figures released by different organisations are usually different and there is reason to doubt such figures.The differences between advance estimates,revised estimates,and final data must be minimum and negligible and also there must be no surprising differences in GDP GROWTH RATE FIGURES released by CSO,NSS,RBI etc for a common period or as on a particular date.The surprising differences between the figures relesed by CSO.NSS,RBI etc lead to confusion and people start doubting the data.If all agencies give adequate attention to quality of dataand reduce the time gap ,then data quality and reliability can be enhanced.If unreliable data or stale data are used assuming a position different from the one that actually obtains the very plan prepared on that basis and decision arrived at based on the asme will be faulty leading to confusion.
The National Statistical Commission must take steps to revamp the data collection process at all levels and the commission must issue suitable guidelines to states and data gathering agencies in this regard.The commission must formulate strategies for speedy collection of reliable data.Reliable data available at the right time alone can prove useful bases for research,planning,and decision making at all levels in government and elsewhere in the economy.
Incorrect and inaccurate data base provide a wrong basis for planning and decision making.Inaccurate data used for research purposes lead to incorrect and erroneous conclusions.There is therefore an urgent need to improve the qualty of macro economic data and ensure their availability with least time lag.States which gather data must give adequate importance to quality and speedy collection of data so that final data are available within at least six months.
In the case of data particularly data relating to GDP and GDP growth rate the figures released by different organisations are usually different and there is reason to doubt such figures.The differences between advance estimates,revised estimates,and final data must be minimum and negligible and also there must be no surprising differences in GDP GROWTH RATE FIGURES released by CSO,NSS,RBI etc for a common period or as on a particular date.The surprising differences between the figures relesed by CSO.NSS,RBI etc lead to confusion and people start doubting the data.If all agencies give adequate attention to quality of dataand reduce the time gap ,then data quality and reliability can be enhanced.If unreliable data or stale data are used assuming a position different from the one that actually obtains the very plan prepared on that basis and decision arrived at based on the asme will be faulty leading to confusion.
The National Statistical Commission must take steps to revamp the data collection process at all levels and the commission must issue suitable guidelines to states and data gathering agencies in this regard.The commission must formulate strategies for speedy collection of reliable data.Reliable data available at the right time alone can prove useful bases for research,planning,and decision making at all levels in government and elsewhere in the economy.
Saturday, September 13, 2008
New Priority Sector Lending Guidelines
Based on G.S.Muthy working group recommendations priority sctor lending guidelines have been revised.The broad categories of advances under priority sector now include agriculture,small enterprises sector,retail trade micro credit and housing sector subject to ceratin limits.The main changes are-
!.Advances in excess of Rs 1 crore granted to corporates will get only one third weightage for being counted under direct agriculture.
2.With a view to encouarging direct retail lending by banks intermediaries have been generally discouraged by keeping loans for onlending barring a few categories out of priority sector fold and by phasing out investment in bonds of financial institutions from priority sector.
3.Some of the banks had a ''nil''or negligible net bank credit and were engaged in mostly non -funded business [derivatives]This distortion has been sought to be corrected by linking their targets to the credit equivalent of their off-balance sheet business.
4.The overall priority sector lending targets at 40 percent and 32 percent for the domestic and foreign banks respectively as also other sub targets have been retained unchanged .However these are now calculated as apercentage of adjusted net bank credit or credit equivalent amount of of off -balance sheet exposure whichever is higher instaed of NBC[net bank credit]
5.Certain concessions granted earlier for the purpose of priority sector [e.g.exclusion of FCNR[B]or NRNR deposits from NBC] have lost foreign exchange.Such concessions have been withdrawn.
6.The revised guidelines also take in to account revised definition of small and micro enterprises as included in the Micro Small and Medium Enterprises Development Act 2006.
!.Advances in excess of Rs 1 crore granted to corporates will get only one third weightage for being counted under direct agriculture.
2.With a view to encouarging direct retail lending by banks intermediaries have been generally discouraged by keeping loans for onlending barring a few categories out of priority sector fold and by phasing out investment in bonds of financial institutions from priority sector.
3.Some of the banks had a ''nil''or negligible net bank credit and were engaged in mostly non -funded business [derivatives]This distortion has been sought to be corrected by linking their targets to the credit equivalent of their off-balance sheet business.
4.The overall priority sector lending targets at 40 percent and 32 percent for the domestic and foreign banks respectively as also other sub targets have been retained unchanged .However these are now calculated as apercentage of adjusted net bank credit or credit equivalent amount of of off -balance sheet exposure whichever is higher instaed of NBC[net bank credit]
5.Certain concessions granted earlier for the purpose of priority sector [e.g.exclusion of FCNR[B]or NRNR deposits from NBC] have lost foreign exchange.Such concessions have been withdrawn.
6.The revised guidelines also take in to account revised definition of small and micro enterprises as included in the Micro Small and Medium Enterprises Development Act 2006.
Another Kannada article of Dr.K.K.Ammannaya
Another new article in Kannada titled''Serpadeya Pragathige Thadeayaguthiruva Brashtachara''has appeared in September 2008 issue of Udyamadarshi,Kannada monthly journal being publshed frm Sirsi,Karnataka.
Sunday, September 7, 2008
Financial Inclusion in Rural India
In spite of the fact that India is one of fastest growing economies in the world and banks in Indai have made rapid head way on various fronts including expansion of branch network in rural areas Rural India is still laging behind in financial inclusion.Vast sections of underprivileged population still stand deprived of not merely formal sources of finance but also basic banking services.According to available data only 44 percent of Indian earners had bank accounts in 2007.Out of them only 38 percent of paid workers in rural India had bank accounts as agianst 62 percent of those in urban areas.
India has been ranked very low i.e 50th below even some African countries like Kenya and Morocco in terms of the index of financial inclusion prepared by Indian Council for Research on International Economic Relations.There is therefore an urgent need to expand basic banking and financial services in rural India.At present the number of branches of banks per one lakh adults is 9.4 as against 14.6 in Malaysia.Domestic bank deposits as a share in GDP is just 54.9 percent in India compared to 123.9 percent in Malaysia.Indian Banks must face the challenge of financial inclusion with new and innovative approaches.Low cost approaches must be explored for this purpose.Banks may adopt ''banknig correspondent'' approach to provide branchless banking facility in rural areas.
India has been ranked very low i.e 50th below even some African countries like Kenya and Morocco in terms of the index of financial inclusion prepared by Indian Council for Research on International Economic Relations.There is therefore an urgent need to expand basic banking and financial services in rural India.At present the number of branches of banks per one lakh adults is 9.4 as against 14.6 in Malaysia.Domestic bank deposits as a share in GDP is just 54.9 percent in India compared to 123.9 percent in Malaysia.Indian Banks must face the challenge of financial inclusion with new and innovative approaches.Low cost approaches must be explored for this purpose.Banks may adopt ''banknig correspondent'' approach to provide branchless banking facility in rural areas.
RECENT TWO KANNADA ARTICLES OFDR.K.K.Ammannaya
Recent two Kannada articles of Dr.K.K.Ammannaya are-
1.Vijaya Karnataka dated 30th July 2008 and 6th August 2008 in two parts. -''Serpadeya gruha Vistharanegagi Kiru Griha Sala ''
2.Vijaya Karnataka dated 27th August 2008 and 3rd September 2008 in two parts-the subject of the article is-''Margadarshi Bank -Yojaneya Sudharane''In addition his articles have also appeared in these months in Udyamadarshi monthly Kannada magazine.
1.Vijaya Karnataka dated 30th July 2008 and 6th August 2008 in two parts. -''Serpadeya gruha Vistharanegagi Kiru Griha Sala ''
2.Vijaya Karnataka dated 27th August 2008 and 3rd September 2008 in two parts-the subject of the article is-''Margadarshi Bank -Yojaneya Sudharane''In addition his articles have also appeared in these months in Udyamadarshi monthly Kannada magazine.
Thursday, September 4, 2008
Another New Article Of Dr.K.K.Ammannaya
A new article titled''Prof.S.L.N.Simha-A Matchless Achiever''has appeared in Bhavan's Journal dated 31st August 2008.Please refer to page 52 in the above issue.
Wednesday, September 3, 2008
BANKERS ON BANKING-NEW BOOK
A New book titled'Bankers On Banking'' edited by Dr.K.K.Ammannaya has been published by DR.T.M.A.Foundation,Manipal.Part I of the book contains edited speeches of five noted bankers who have won K.K.Pai National Banking Awardso far.The speeches made by them after receiving the award have been edited and included in this part.Part II contains profiles of these ward winning bankers written by Dr.Ammannaya.Sri.K.K.Pai Regisrar,Academy Of General Education,Manipal has written foreward to this book.
Wilful Defaulters-Restructuring of Their Loan Accounts
The RBI has recently proposed that loans extended to wilful defaulters can be restructured in case they come foreward to rectify the deafult.Banks have to review the reasons for the classification of the borrowers as wilful defaulters especially in old cases where the manner of classification of borrowers as wilful defaulters was not transparent.RBI has in its recent circular on ''Prudential Guidelines on Restructuring of Advances by Banks''clarified that accounts of borrowers indulging in frauds and malfeasance will continue to remain ineligible for resructuring.
A wiful borrower is one who has failed to fulfil his repayment obligations although he has capacity to honour the said obligation.As per CIBIL data as on 31st March 2008there were 2681 loan accounts of Rs 25 lakhs and above of wilful defaulters involving an ammount of Rs10433 crores.As per RBI guidelines restructuring of such accounts can be done if there is certainty of repayment after restructuring and the concerned parties are interested in rectfing the deault apart from the activity or project of the borrowers being found viable..Banks have to place the policy in this regard before their Boards and restrucuring can be done with the approval of Boards.Companies which are guilty of siphoning and diversion of funds must be debarred from institutional funds for 5 years.
If properly and carefully implemented the scheme of restrucuring of accounts of wilful borrowers may afford an excellent opportunity to wilful borrowers to rectify their default and turn over a new leaf.It will also help them to erase their bad image as wilful defaulters.They can after restructuring keep their accounts regular and close the accounts through regular repayment of instalments .On closure of the restructured loans they can even get new loans from banks.Thus the scheme will be a boon to wilful defaulters.The scheme will also help banks in getting rid of many NPA accounts.It is possible that many of restructured loan accounts may continue to be regular and they will thus be performing assets.Banks will be greatly benefited from this as they can recognise interst income in respect of such restrucured loan accounts after one year from the date of restrucuring in case the said accounts coninue to be regular .The scheme will surely help in promoting good repayment culture.
A wiful borrower is one who has failed to fulfil his repayment obligations although he has capacity to honour the said obligation.As per CIBIL data as on 31st March 2008there were 2681 loan accounts of Rs 25 lakhs and above of wilful defaulters involving an ammount of Rs10433 crores.As per RBI guidelines restructuring of such accounts can be done if there is certainty of repayment after restructuring and the concerned parties are interested in rectfing the deault apart from the activity or project of the borrowers being found viable..Banks have to place the policy in this regard before their Boards and restrucuring can be done with the approval of Boards.Companies which are guilty of siphoning and diversion of funds must be debarred from institutional funds for 5 years.
If properly and carefully implemented the scheme of restrucuring of accounts of wilful borrowers may afford an excellent opportunity to wilful borrowers to rectify their default and turn over a new leaf.It will also help them to erase their bad image as wilful defaulters.They can after restructuring keep their accounts regular and close the accounts through regular repayment of instalments .On closure of the restructured loans they can even get new loans from banks.Thus the scheme will be a boon to wilful defaulters.The scheme will also help banks in getting rid of many NPA accounts.It is possible that many of restructured loan accounts may continue to be regular and they will thus be performing assets.Banks will be greatly benefited from this as they can recognise interst income in respect of such restrucured loan accounts after one year from the date of restrucuring in case the said accounts coninue to be regular .The scheme will surely help in promoting good repayment culture.
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