Book Review “Just A Mercenary”

May 14, 2024Uncategorizedautobiography, Finance Secretary, IAS, Indian Economy, Inflation, LBS National Academy, Life, Mercenary, RBIyerramr

Just A Mercenary? Notes from my Life and Career

Author: Duvvuri Subba Rao (2024)

Publisher: Penguin Random House

Price: Rs.799 © Duvvuri Subba Rao

Forty years of Duvvuri Subba Rao’s remarkable journey of his life is the quint essence of his book. The title is most intriguing as the Collins Dictionary defines ‘Mercenary’ as: “A Soldier who is paid to fight by a country or group that he or she does belong to; or Someone who is interested only in the money that he/she can get from a person or out of a situation; used showing disapproval.” After I read the book, I felt like disapproving the title because he just did not fit into that definition, although he tried to explain his choice of the title in the book, in his Letter to his Mother in the last chapter. It is the fascinating story of a person who rose to great heights in life tenaciously pursuing his ambition in life. Ambition is the elixir of life and drives one to achieve it in good time while overambition kills growth in every direction. His education IIT Engineering and his professional pursuit as an administrator have no kinship. During the course of his administrative career, he became an economist and pursued doctoral work. Post-retirement, he continued his researcher ambition. This trilogy has many twists and turns he takes us through his autobiography.

Starting from the preparation of his bed immediately after waking up in the Sainik School education kept him in good stead throughout his life and he remained highly disciplined in life. Subba Rao makes the reader travel with him in his training days at the Lal Bahadur Sastry National Academy, Mussoorie where I taught economics to the budding trainees during the years 1990 and 1991. B.N. Yugandhar was the Director during my days who incidentally was the Deputy Director when ‘Subba’ was the trainee at the place. “ The hilly terrain, narrow winding roads, scattered dwellings dotting the hill slopes, low-intensity traffic, cold and damp weather and most of all, the hardy and charming hill people gave Mussoorie a distinct character and an endearing personality.” I also agree with him the modern structure of the Academy that stands now is a contrast to the beautiful architecture of Charleville.

The subtitle of the book, ‘Notes from my life and Career’ reminds me of the Diary every trainee should submit after returning from the field training for a review of the cases he handled as Assistant/sub-collector to the Academy. The most important statements he made very truthfully is: ‘No IAS officer is trained to be honest’, and ’the only guide is your conscience.’ (Chapter 3)

The beauty of his narrative takes us his intense involvement with people he was to serve endearingly at Parvathipuram (Visakhapatnam District of Andhra Pradesh), Srikakulam as Project Director, Small Farmers’ Development Agency. The episode relating to his fully white-clad, turban-wearing Duffedar waiting to seek an excuse that day because his wife expired a few hours before his reporting explains the empathy he had for people working with him. Another instance prompted by his encounter with Dr. Thangarajan, Superintendent of the Leprosy hospital at Salur is heartrending. He took the doctor’s admonition for distancing leprosy-stuck patient as untouchable in the right spirit after realizing that the disease is not contagious unless one developed a physical contact with the patient. He appointed as driver much against the resentment of his staff and advisers, a person who earlier contracted the disease but was living with the stigma even after cure. These two instances reflect his personality – compassion for the disadvantaged.

For any IAS officer, the District Collector is the ‘defining post’in his career. He was not happy that he had short tenures as District Collector. His experiences with the renowned Chief Ministers of Andhra Pradesh, K. Vijaya Bhaskar Reddy, J. Vengal Rao, the actor-turned politician, N.T. Rama Rao, Chandra Babu Naidu (CBN) and their personal secretaries and the Chief Secretaries have a special flavour for the reader. When he was transferred as Officer on Special Duty (OSD) out of his earlier post – Executive Director of the APIDC, his shock was described in the chapter, ‘Why Me’. Wiser counsels prevailed on him to accept the challenge posed by the CM, N.T. Rama Rao to start the work on the Arrack bottling Project, where his earlier misgivings and self-doubt gave away to optimism and confidence. He learnt two lifetime lessons: “1. The secret to success in life is to discover your passion and pursue it. 2. The true test of leadership is to play the hand that you’ve been dealt – to do whatever it is you have to do with passion.” The box item at the end of the eighth chapter is worth preserving and following. His Delhi deputation made him realise the heights of bureaucracy (1988-93).

Understanding village life is imperative for every IAS officer and I would add, every bank executive. His description of this part of his career lures one to stay in a village. If you want to learn farming, learn it from the farmer and not just in Agricultural Colleges/universities or ICAR institutions. All the latter help understand the science and technology of agriculture. The most interesting chapter is ‘Chasing the Monsoon’. His All the illustrious IAS Officers he named in the book, his seniors, are a generation that brought credit to the state of Andhra Pradesh for their ethical behaviour, courage of conviction, dexterity in handling tough situations, convincing abilities, and leadership. They used to write their notes to the Ministers and I was a privy to some of them, they used to present the pros and cons of a decision and leave the decision to the Minister. Once the Minister of CM decided on an issue, they knew that they had to find ways to implement them, even if it is against their conscience!

The most rewarding experience he narrated was that of the State Finance Secretary. This chapter titled: “If something Cannot Go on Forever, It will stop”. This chapter describes the way a White Paper on a subject is necessitated and the way it needs to be handled for wider acceptance of the people. CBN, the CM who was steering the reforms in the State had a special place for him during his regime. The cabinet note on the White Paper suggested that structural problems cannot be resolved through band-aid solutions but will need a deep surgery. Rationalizing subsidies and correcting the allocative inefficiency of the resources of the state was a politically difficult problem and these were dextrously handled by the CBN. The lesson learnt by him was – to be open-minded to suggestions and not let personal prejudices come in the way of dealing with the political masters. His encounters with the reformist CM N.T. Rama Rao in the earliest hours of the day, who introduced one rupee a kg rice (latter hiked to two rupees), share in the property for women equal to men, scholarships, or waiver of fees for pursuing higher education to the students that continued for decades after him, also offer the reader a good bite.

His passion for Indian Administrative Service kept him in a dilemma when he got a permanent assignment at the World Bank posting as economist to guide the destiny of Ethiopia.

The way he catapulted to the enviable position of the Governor, Reserve Bank of India at a time when the whole world was fighting the post-recession period (2008-13) and the way he had to navigate the rising inflation through a serial increase in interest rates, much to the chagrin and disappointment of some of the powers that be, arguing for space for economic growth to take the prime place in the agenda of the Governor, RBI are dealt with very succinctly. These issues have been dealt with very clearly in one of his earlier books – ‘Who Moved My Interest Rates?’

Some of his chapters remind me of my quote in ‘A Saint in the Board Room’ from Mahatma Gandhi:

Gandhiji said unto himself: ‘I myself do not feel like a saint in any shape or form’ (Young India Jun 20, 1924).[i]

It is important to watch the biological clock in life:

Age	Designated as	Our role in this period
0 – 20	Butterfly	We have colourful dreams; we do not bother for anything
20 – 40	Migratory bird	We go in search of career to better environmental destinations
40 – 60	Donkey	We bear the burden of the family
60 – 80	Snail	We slowly withdraw into a shell, looking more inwards
80 – 100	Crane	We wait for our final journey towards the eternal world

Age is just a number. There are many who do not lead the life of a snail or crane, these days. They keep active mentally that keeps their imperative physical ailments away from them. The author is into this stage. He was quite clear in his ambition and he is conscious of always delivering the best whatever assignment he handled. As Governor, he took the RBI to the people through cartoons, to the schools and colleges, and made ‘financial inclusion’ as an agenda to be pursued with vigour as long as poverty and inequalities persisted in the society.

The book offers many lessons for the current and future generations and a ‘must read’ for all the officers of the Indian Administrative Service for they should know what not to do, seeking to do many important policies through ‘consultants’ and post their liberal comments/observations over them.

Reviewed by B. Yerram Raju, Economist, Risk Management, & Turnaround Management SME Expert

^[i] Mahatma Gandhi’s Significance for Today: John Hick, Pg 2 of 11 (http://www.johnhick.org.uk/article15.html)

April 14, 2024Uncategorizedyerramr

Letting me do what I like

Letting me do what I like

April 14, 2024Uncategorizeddailyprompt, dailyprompt-1909yerramr

My wife brews the coffee at the earliest hour 5 a.m., the flavours of which allure me most. Later, I go for a morning walk and do my yoga exercises, both lasting for about 45 minutes. She does not disturb me when I am on my system thereafter for about two hours at a stretch until I take my bath.

I used to help her in cutting vegetables and deciding on the day’s culinary. I do my prayer for half an hour. If there were some meetings scheduled either online or offline, I attend to them.

I pick up any household requirements on my wayback from the office and relax in the evening. Both of us watch the interesting programmes on the TV together. What else I can demand from her?

All the comfort she gives me. My children staying abroad keep visiting us at their convenience and spend their good time with us and keep us happy. Enviable indeed.

Daily writing prompt

Describe a positive thing a family member has done for you.

View all responses

April 14, 2024Uncategorizedagriculture, farmers, farming, india, nabard, news, priority-sector, RBI, reformsyerramr

A Fascinating Farm Sector Amidst Frustrated Farmers Begs reforms

A fascinating farm sector amidst frustration of farmers begs reforms.
B. Yerram Raju*
Despite the recent downturn with a -0.7 percent growth rate in 2023-24, Indian agriculture has been instrumental in ensuring food security, driving economic growth, and sustaining livelihoods. The sector stood the test of Covid-19 much to the dismay of the whole world.
Growth Pattern:
Over the years, Indian agriculture has witnessed significant transformations, marked by technological advancements, policy reforms, and structural changes. The Green Revolution propelled the country towards self-sufficiency in food production, but challenges such as sustainability, climate resilience, export competitiveness, and equitable distribution persist.
The growth of per capita food production has been remarkable, with a 50 percent increase recorded in the period 1951-2001 and another 50 percent increase achieved in less than 25 years thereafter. However, disparities exist among different food commodities, with pulses showing a decline in production compared to cereals, oilseeds, fruits, vegetables, and livestock products.
Per capita production of major food commodities since 1960s (kg/year)

1961-70
1971-80
1981-90
1991-00
2001-10
2011-20
Cereals
121.0
135.1
151.8
169.0
173.1
215.0
Pulses
23.3
18.4
16.3
14.6
12.3
15.7
Oilseeds
15.3
15.3
16.8
23.2
21.6
24.1
Sugar
24.1
24.5
26.0
30.3
27.9
29.5
Fruits
23.2
31.8
33.1
41.2
49.7
69.7
Vegetables
47.6
68.9
72.4
77.3
97.7
133.5
Egg
0.4
0.7
1.0
1.4
2.1
3.3
Meat & Fish
4.3
4.6
5.0
6.9
8.3
13.3
Milk
43.2
42.1
55.6
70.8
88.0
121.2

Source: Ramesh Chand’s estimates based on production data of Directorate of Economics and Statistics and population data of National Accounts.
Increase in food production was more than twice over the increase in human population. Income from the agriculture sector, at 2011-12 prices, increased 7.2 times over this period, with an underlying annual trend growth rate of 2.83 per cent.
Future Beset With Problems
Cereals: According to the latest Global Agricultural Information Network (GAIN-USFDA) forecast, India is expected to have a record wheat harvest in market year 2024/2025, with production forecasted at 112.5 million metric tons (MMT). India is set to become an importer of wheat for the first time in six years, with imports forecasted at 2 MMT. Rice production in India is forecasted to be just shy of a record harvest at 135 MMT in market year 2024/2025. India is expected to export around 18 MMT of rice in market year 2024/2025. Corn production in India is forecasted to be near record levels at 37 MMT in market year 2024/2025.
GAIN forecast in March 2024 in regard to the main crops, particularly rice of different varieties, the major staple crop consumed by majority population is beset with problems that require calibrated farmer consultation and solutions. Indian rice production has been trending upwards over the last two decades, driven by expanding government MSP procurement, development of higher yielding varieties, and expansion in irrigation resources. There are other cereal crops that also deserve particular attention of the policy makers and researchers.
Rice production systems in India are vulnerable to climate change, soil degradation, declining water tables, and the emergence of new diseases/pests. Rice consumption in India is forecasted to be 120 million metric tons in MY 2024/2025, with per capita consumption stagnant or declining. The livestock feed industry is increasingly using broken rice and de-oiled rice bran as fillers for energy supplements in commercial feed. India has been the world’s leading rice exporter since the export ban was removed in 2011, with strong export demand despite export restrictions on coarse grain rice. Rice exports in MY 2023/2024 are estimated to reach 15 million metric tons, with steady global demand. India’s rice ending stocks in MY 2024/2025 are forecasted to be 33.5 million metric tons, with 30 million metric tons in government stocks and 3.5 million metric tons in private stocks. The Indian government has imposed export bans, export duties, and minimum export prices on certain types of rice, but exemptions have been allowed for specific countries and this is an essential internal food management system. Import tariffs on rice in India remain unchanged, and the import of genetically modified rice is effectively banned.
Corn production has shown an upward trend over the last decade due to improved hybrid varieties and growing domestic demand from feed manufacturers and starch industry. Coarse grain production in India is heavily dependent on the performance of the southwest monsoon rains, with about 85% of the cultivation being rainfed. Sorghum and millet cultivation has declined over the years due to the rising production and supplies of subsidized rice and wheat through food security programs. Barley production in India is a small winter crop cultivated in northwestern India, with production based on weather conditions and market demand. Market Year (MY) 2024/2025 coarse grain production is forecasted to recover to 56.2 MMT, with corn, millet, sorghum, and barley being the major crops. Coarse grain consumption is expected to increase in MY 2024/2025, driven by the growth in demand for corn for animal feed and industrial usage, as well as the expected recovery in consumption of millet, sorghum, and barley. Corn prices have been on a steady rise since the beginning of MY 2023/2024 but are expected to ease with the arrival of the rabi crop.
India is no longer export competitive in corn due to relatively firm domestic prices and weak global prices. The import duties on coarse grains in India have remained unchanged, and there are no export restrictions on corn, millet, sorghum, and barley.
Oilseeds: India’s oilseeds production in MY 2024/25 is forecasted to reach 41.9 million metric tons (MMT), a marginal drop from the estimate of 42.7 MMT in MY 2023/24. This is due to weaker prices for Indian producers, limited agricultural input availability, and weather trends. Oil meal production is forecasted to reach 21 MMT for MY 2024/25, with good soybean, rapeseed-mustard, and peanut oilseed production for two consecutive years. India’s imports of edible oils are forecasted to reach 16 MMT, a slight drop from MY 2023/24, mainly due to the impact of El Nino weather patterns on Indonesia, India’s largest supplier of palm oil.
The non-agriculture sector witnessed higher growth than agriculture, resulting in overall national income increasing by 28.4 times, with an average annual growth rate of 4.83 per cent. However, the number of agriculture workers increased from 9.72 crore in 1950-51 to 25 crore in 2021-22.
Challenges
Despite the substantial growth in agricultural productivity, the sector continues to grapple with issues such as farmer distress, land fragmentation, and inadequate access to credit and markets. The increasing number of agriculture workers, which has risen from 9.72 crore in 1950-51 to 25 crore in 2021-22, underscores the need for comprehensive policy interventions to address labour dynamics and rural livelihoods. Latest employment statistics released in March 2024 by the International Labour Organization (ILO) and Institute of Human Development (IHD) presents a grim picture of the unemployment in the unorganised sector.83 percent of the youth account for the unemployed work force.
The structural transformation of the agriculture sector, characterized by the migration of farm labour to non-farm sectors, underscores the need for diversification and value addition in rural economies. Addressing issues such as land tenure, tenancy rights, and farm size consolidation is crucial for enhancing agricultural productivity and farmer incomes. While labour in agriculture is viewed as unorganized, due to the digitization process and mobile applications, the scope for on-farm and off-farm data aggregators and market aggregators is vast.
Farm Credit has its own share in farmers’ distress
The rise in agricultural credit, which has grown more than fourfold from March 2010 to March 2023, that includes credit disbursed through Kisan Credit Cards, highlights the reliance of farmers on institutional support, going by the Basic Statistical Returns (BSR) statistics of the RBI. However, there is a growing demand for loan waivers amidst calls for increased credit accessibility. Investment credit for agriculture mostly flowing as a refinance from the National Bank for Agriculture and Rural Development (NABARD), and as a co-investment model has been proposed in the Union Budget 2023-24 to serve the following purposes:
This is to finance start-ups for agriculture & rural enterprise, relevant for farm produce value chain To provide equity support to agri-food start-ups and start-ups allied to them (e.g. agri/rural fintech)
To nurture and support agri-food tech start-ups in their evolution,
To provide venture debt to agri-food start-ups – Can be augmented through private sector finance (banks, FIs)
To provide equity support to agri-food start-ups and start-ups allied to them (e.g. agri/rural fintech)
To nurture and support agri-food tech start-ups in their evolution, and
To provide venture debt to agri-food start-ups – Can be augmented through private sector finance (banks, FIs).
The depletion of soil fertility due to mono-cropping and indiscriminate use of water and fertilizers poses a significant threat to long-term agricultural sustainability. Encouraging the adoption of natural and organic farming practices is essential for restoring soil health and mitigating environmental degradation.
Laudable Initiatives Need Careful Planning
While this is laudable, the delivery of such credit is beset with problems inherent in term lending portfolio of the primary lenders, viz., commercial banks, Regional Rural Banks, and District Cooperative Central Banks on one side, on the other side, there is no programme for soil rejuvenation and meaningful exploitation of the irrigation potential – both ground and surface water. Balancing the need for credit with sustainable agricultural practices is essential to prevent over-indebtedness and ensure long-term viability. 90 percent of the farmers are small and marginal farmers, shareholders, and tenant farmers whose ability to borrow term credit for the aforesaid purposes is highly limited due to their overindulgence in targeted short term credit (crop loans). NABARD that prepares perspective plans for the states and districts, and the State Level Bankers’ Committees that prepare Annual Plans should consider targeting specific investment credit outlays for the aforementioned purposes. Zoning the crops and crop planning should occupy their priority during such exercises instead of being overenthusiastic about fulfilling the Union Budget targets on crop loans.
Agricultural cooperatives and clusters offer promising solutions to promote collective action and facilitate access to markets, technology, and extension services. However, reforms in land and cooperative laws are imperative to empower farmers and promote equity in land ownership and management. Land markets need to look at more than the real estate market and farmers should be land equity holders. RBI needs to recast the priority sectors that push agriculture and allied activities and manufacturing MSEs to scale up employment.
Water Use Efficiency Important
Moreover, redefining productivity metrics to focus on water-use efficiency and resource optimization is critical for sustainable agriculture. Collaborative efforts among riparian states are necessary to address water scarcity issues and ensure equitable distribution and efficient utilization of water resources. Issue of free power has long ceased to be economic that is also responsible for indiscriminate drawal of groundwater viewed from the viewpoint of per unit of power consumed to its productive output. We should move forward to measuring productivity on farm from per acre to per cusec of water.
Sustainability means that successive generations will be able to enjoy what the present generation is able to enjoy from every unit of production. Going by the global trends in consumption of every type of resource, that would appear a tall order.
Climate resilience, often cited as extremely important, has its proponents and opponents equally arguing that agriculture contributes to it as much as it gets effected, just viewed in terms of carbon emissions. Carbon is a productive input for farm.
Conclusion
The Indian government has been promoting the production and consumption of millet as a nutri-cereal and sustainable crop option against the existing rice-wheat cropping system.
In conclusion, while Indian agriculture has made significant strides, it is imperative to address existing challenges and embrace sustainable and inclusive practices. A holistic approach, encompassing policy reforms, technological innovations, institutional strengthening, and community participation, is essential to unleash the full potential of Indian agriculture and ensure food security, rural prosperity, and environmental sustainability. Politicians and farmers are strange bed mates. More than climate resilience, political resilience is imperative for progressive farm reforms.
*The author is an economist and risk management specialist.
https://wordpress.com/post/yerramr.com/55

A Fascinating Farm Sector Amidst Frustrated Farmers Begs reforms

April 13, 2024Uncategorizedyerramr

A fascinating farm sector amidst frustration of farmers begs reforms.

B. Yerram Raju*

Despite the recent downturn with a -0.7 percent growth rate in 2023-24, Indian agriculture has been instrumental in ensuring food security, driving economic growth, and sustaining livelihoods. The sector stood the test of Covid-19 much to the dismay of the whole world.

Growth Pattern:

Over the years, Indian agriculture has witnessed significant transformations, marked by technological advancements, policy reforms, and structural changes. The Green Revolution propelled the country towards self-sufficiency in food production, but challenges such as sustainability, climate resilience, export competitiveness, and equitable distribution persist.

The growth of per capita food production has been remarkable, with a 50 percent increase recorded in the period 1951-2001 and another 50 percent increase achieved in less than 25 years thereafter. However, disparities exist among different food commodities, with pulses showing a decline in production compared to cereals, oilseeds, fruits, vegetables, and livestock products.

Per capita production of major food commodities since 1960s (kg/year)

	1961-70	1971-80	1981-90	1991-00	2001-10	2011-20
Cereals	121.0	135.1	151.8	169.0	173.1	215.0
Pulses	23.3	18.4	16.3	14.6	12.3	15.7
Oilseeds	15.3	15.3	16.8	23.2	21.6	24.1
Sugar	24.1	24.5	26.0	30.3	27.9	29.5
Fruits	23.2	31.8	33.1	41.2	49.7	69.7
Vegetables	47.6	68.9	72.4	77.3	97.7	133.5
Egg	0.4	0.7	1.0	1.4	2.1	3.3
Meat & Fish	4.3	4.6	5.0	6.9	8.3	13.3
Milk	43.2	42.1	55.6	70.8	88.0	121.2

Source: Ramesh Chand’s estimates based on production data of Directorate of Economics and Statistics and population data of National Accounts.

Increase in food production was more than twice over the increase in human population. Income from the agriculture sector, at 2011-12 prices, increased 7.2 times over this period, with an underlying annual trend growth rate of 2.83 per cent.

Future Beset With Problems

Cereals: According to the latest Global Agricultural Information Network (GAIN-USFDA) forecast, India is expected to have a record wheat harvest in market year 2024/2025, with production forecasted at 112.5 million metric tons (MMT). India is set to become an importer of wheat for the first time in six years, with imports forecasted at 2 MMT. Rice production in India is forecasted to be just shy of a record harvest at 135 MMT in market year 2024/2025. India is expected to export around 18 MMT of rice in market year 2024/2025. Corn production in India is forecasted to be near record levels at 37 MMT in market year 2024/2025.

GAIN forecast in March 2024 in regard to the main crops, particularly rice of different varieties, the major staple crop consumed by majority population is beset with problems that require calibrated farmer consultation and solutions. Indian rice production has been trending upwards over the last two decades, driven by expanding government MSP procurement, development of higher yielding varieties, and expansion in irrigation resources. There are other cereal crops that also deserve particular attention of the policy makers and researchers.

Rice production systems in India are vulnerable to climate change, soil degradation, declining water tables, and the emergence of new diseases/pests. Rice consumption in India is forecasted to be 120 million metric tons in MY 2024/2025, with per capita consumption stagnant or declining. The livestock feed industry is increasingly using broken rice and de-oiled rice bran as fillers for energy supplements in commercial feed. India has been the world’s leading rice exporter since the export ban was removed in 2011, with strong export demand despite export restrictions on coarse grain rice. Rice exports in MY 2023/2024 are estimated to reach 15 million metric tons, with steady global demand. India’s rice ending stocks in MY 2024/2025 are forecasted to be 33.5 million metric tons, with 30 million metric tons in government stocks and 3.5 million metric tons in private stocks. The Indian government has imposed export bans, export duties, and minimum export prices on certain types of rice, but exemptions have been allowed for specific countries and this is an essential internal food management system. Import tariffs on rice in India remain unchanged, and the import of genetically modified rice is effectively banned.

Corn production has shown an upward trend over the last decade due to improved hybrid varieties and growing domestic demand from feed manufacturers and starch industry. Coarse grain production in India is heavily dependent on the performance of the southwest monsoon rains, with about 85% of the cultivation being rainfed. Sorghum and millet cultivation has declined over the years due to the rising production and supplies of subsidized rice and wheat through food security programs. Barley production in India is a small winter crop cultivated in northwestern India, with production based on weather conditions and market demand. Market Year (MY) 2024/2025 coarse grain production is forecasted to recover to 56.2 MMT, with corn, millet, sorghum, and barley being the major crops. Coarse grain consumption is expected to increase in MY 2024/2025, driven by the growth in demand for corn for animal feed and industrial usage, as well as the expected recovery in consumption of millet, sorghum, and barley. Corn prices have been on a steady rise since the beginning of MY 2023/2024 but are expected to ease with the arrival of the rabi crop.

India is no longer export competitive in corn due to relatively firm domestic prices and weak global prices. The import duties on coarse grains in India have remained unchanged, and there are no export restrictions on corn, millet, sorghum, and barley.

Oilseeds: India’s oilseeds production in MY 2024/25 is forecasted to reach 41.9 million metric tons (MMT), a marginal drop from the estimate of 42.7 MMT in MY 2023/24. This is due to weaker prices for Indian producers, limited agricultural input availability, and weather trends. Oil meal production is forecasted to reach 21 MMT for MY 2024/25, with good soybean, rapeseed-mustard, and peanut oilseed production for two consecutive years. India’s imports of edible oils are forecasted to reach 16 MMT, a slight drop from MY 2023/24, mainly due to the impact of El Nino weather patterns on Indonesia, India’s largest supplier of palm oil.

The non-agriculture sector witnessed higher growth than agriculture, resulting in overall national income increasing by 28.4 times, with an average annual growth rate of 4.83 per cent. However, the number of agriculture workers increased from 9.72 crore in 1950-51 to 25 crore in 2021-22.

Challenges

Despite the substantial growth in agricultural productivity, the sector continues to grapple with issues such as farmer distress, land fragmentation, and inadequate access to credit and markets. The increasing number of agriculture workers, which has risen from 9.72 crore in 1950-51 to 25 crore in 2021-22, underscores the need for comprehensive policy interventions to address labour dynamics and rural livelihoods. Latest employment statistics released in March 2024 by the International Labour Organization (ILO) and Institute of Human Development (IHD) presents a grim picture of the unemployment in the unorganised sector.83 percent of the youth account for the unemployed work force.

The structural transformation of the agriculture sector, characterized by the migration of farm labour to non-farm sectors, underscores the need for diversification and value addition in rural economies. Addressing issues such as land tenure, tenancy rights, and farm size consolidation is crucial for enhancing agricultural productivity and farmer incomes. While labour in agriculture is viewed as unorganized, due to the digitization process and mobile applications, the scope for on-farm and off-farm data aggregators and market aggregators is vast.

Farm Credit has its own share in farmers’ distress

The rise in agricultural credit, which has grown more than fourfold from March 2010 to March 2023, that includes credit disbursed through Kisan Credit Cards, highlights the reliance of farmers on institutional support, going by the Basic Statistical Returns (BSR) statistics of the RBI. However, there is a growing demand for loan waivers amidst calls for increased credit accessibility. Investment credit for agriculture mostly flowing as a refinance from the National Bank for Agriculture and Rural Development (NABARD), and as a co-investment model has been proposed in the Union Budget 2023-24 to serve the following purposes:

This is to finance start-ups for agriculture & rural enterprise, relevant for farm produce value chain To provide equity support to agri-food start-ups and start-ups allied to them (e.g. agri/rural fintech)
To nurture and support agri-food tech start-ups in their evolution,
To provide venture debt to agri-food start-ups – Can be augmented through private sector finance (banks, FIs)
To provide equity support to agri-food start-ups and start-ups allied to them (e.g. agri/rural fintech)
To nurture and support agri-food tech start-ups in their evolution, and
To provide venture debt to agri-food start-ups – Can be augmented through private sector finance (banks, FIs).

The depletion of soil fertility due to mono-cropping and indiscriminate use of water and fertilizers poses a significant threat to long-term agricultural sustainability. Encouraging the adoption of natural and organic farming practices is essential for restoring soil health and mitigating environmental degradation.

Laudable Initiatives Need Careful Planning

While this is laudable, the delivery of such credit is beset with problems inherent in term lending portfolio of the primary lenders, viz., commercial banks, Regional Rural Banks, and District Cooperative Central Banks on one side, on the other side, there is no programme for soil rejuvenation and meaningful exploitation of the irrigation potential – both ground and surface water. Balancing the need for credit with sustainable agricultural practices is essential to prevent over-indebtedness and ensure long-term viability. 90 percent of the farmers are small and marginal farmers, shareholders, and tenant farmers whose ability to borrow term credit for the aforesaid purposes is highly limited due to their overindulgence in targeted short term credit (crop loans). NABARD that prepares perspective plans for the states and districts, and the State Level Bankers’ Committees that prepare Annual Plans should consider targeting specific investment credit outlays for the aforementioned purposes. Zoning the crops and crop planning should occupy their priority during such exercises instead of being overenthusiastic about fulfilling the Union Budget targets on crop loans.

Agricultural cooperatives and clusters offer promising solutions to promote collective action and facilitate access to markets, technology, and extension services. However, reforms in land and cooperative laws are imperative to empower farmers and promote equity in land ownership and management. Land markets need to look at more than the real estate market and farmers should be land equity holders.

Water Use Efficiency Important

Moreover, redefining productivity metrics to focus on water-use efficiency and resource optimization is critical for sustainable agriculture. Collaborative efforts among riparian states are necessary to address water scarcity issues and ensure equitable distribution and efficient utilization of water resources. Issue of free power has long ceased to be economic that is also responsible for indiscriminate drawal of groundwater viewed from the viewpoint of per unit of power consumed to its productive output. We should move forward to measuring productivity on farm from per acre to per cusec of water.

Sustainability means that successive generations will be able to enjoy what the present generation is able to enjoy from every unit of production. Going by the global trends in consumption of every type of resource, that would appear a tall order.

Climate resilience, often cited as extremely important, has its proponents and opponents equally arguing that agriculture contributes to it as much as it gets effected, just viewed in terms of carbon emissions. Carbon is a productive input for farm.

Conclusion

The Indian government has been promoting the production and consumption of millet as a nutri-cereal and sustainable crop option against the existing rice-wheat cropping system.

In conclusion, while Indian agriculture has made significant strides, it is imperative to address existing challenges and embrace sustainable and inclusive practices. A holistic approach, encompassing policy reforms, technological innovations, institutional strengthening, and community participation, is essential to unleash the full potential of Indian agriculture and ensure food security, rural prosperity, and environmental sustainability. Politicians and farmers are strange bed mates. More than climate resilience, political resilience is imperative for progressive farm reforms.

*The author is an economist and risk management specialist.

The Year 2023 – The Books that Influenced Me

November 29, 2023UncategorizedConstitutionalism, G-20@23, Law, Learning, MSE Facilitation Council, Public Procurement, Technologyyerramr

The Launch of TIHCL five years ago with R. Subrahmanyan, RD, RBI, Hyderabad, J. Swaminathan, the then CGM, SBI, Hyderabad, Jayesh Ranjan, I.A.S., Principal Secretary and E.V. Narasimha Reddy, MD, TSIIC – a landmark in my life and career.

When K.P.R. Nair from Konark Publishers (P) Ltd., the publisher of four of my books asked me how my year 2023 is, I am reminded of Francis Bacon who wrote in his “Advancement of Learning” as follows:

“Read not to contradict and confute; nor to believe and take for granted; nor to find talk and discourse; but to weigh and consider. Some books are to be tasted, others to be swallowed, and some few to be chewed and digested: that is, some books are to be read only in parts, others to be read, but not curiously, and some few to be read wholly, and with diligence and attention.” Here are a few books that I read fully and top my list.

I read with great interest the book by V. Srinivas, I.A.S., G-20@23: The Roadmap to Indian Presidency and reviewed it both for some news daily and the Journal of Institute of Public Enterprise. The author is presently Secretary to Government of India.

The other three books are: 1. Forks in the Road by Fr. C. Rangarajan, Former Governor, RBI and former Chief Economic Adviser who wrote: “One does not plan one’s life fully. Some of it is planned, but some of it is purely accidental. Much of my life is a matter of circumstance.” The statement mirrored my career too although no match to such a stalwart. 2. “Right Under Your Nose” by R. Giridharan: This is a detective story that I could finish in one go. The smooth flow of the events like the killing of a woman, a scientist in broad daylight and yet no murder could be seen impressed me although I am not a lover of novels. 3. Constitutionalism and The Rule of Law – In a Theatre of Democracy by a former Justice A.K. Sikri: This truly helped me understand the law in the social context. As mentioned in the foreword by Chief Justice Dr. D. Y. Chandrachud, the book is rich in prose and content.”

Public Procurement: What is the right thing to do? (Ready Reckoner) written by Lakshmi Prasanna Chodavarapu, Member, Telangana District Consumer Commission, influenced my thinking to develop a similar ready reckoner for the Micro and Small Enterprise Facilitation Council through the Telangana Industrial Health Clinic Ltd.,(TIHCL), in collaboration with Crux Management Services (P) Ltd., and Federation of Telangana Chamber of Commerce and Industry (FTCCI).

Though I authored sixteen books that include my autobiography – Roots to Fruits: The Journey of a Development Banker – and around 3200 articles in popular dailies and research journals of repute, I continue to feel the need for further learning. Technology is the most formidable driver of the future, where I keep learning from my five grand children who excelled in their own way in software implementation management in the world’s most reputed institutions. I look to the year 2024 as a year of further Learning.

Will Banks future-proof and Reinvent?

November 25, 2023UncategorizedAI, Banking, Banking Regulations, Growth, Indian Economy, Riskmanagementyerramr

Will Banks future-proof and reinvent themselves?

B. Yerram Raju*

A World Bank blog in October 2023 titled “Banks with fewer branches fared worse during the banking turmoil of 2023 in the US.” The authors in their paper “Bank Branch Density and Bank Runs,” show that the three bank failures (Silicon Valley Bank, Signature Bank and First Republican Bank, with 17, 38 and 87 branches respectively) were a manifestation of a broader problem, and that low bank branch density, in general, is related to higher deposit instability. Urban Cooperative Banks occupying 8 percent of India’s banking space with around 1580 branches are strategically moving to mergers or forming into Small Finance Banks, the latest structures closer to the people. 92 percent of banking is covered still by around 2lakh branches – albeit with increasingly less share in the rural areas. The first axe of all mergers fell on the rural bank branches.

Digital banking enables banks with low branch density to grow faster and attract depositors during relatively calm times. But when interest rates increased and economic conditions deteriorated, those large deposit inflows took the form of “hot money” and changed its course.” How best the Indian banks are future proofing themselves? Are they complacent or are they in a mood to re-invent themselves if Indian economy impacted by the global uncertainties, wars in one corner of the world or the other, and impending oil crisis pushing inflation to a new high?

GREEN FINANCE

This is not so much to fault the Indian banking of the day but to look at sustainability of the financial sector, and in particular, banking, in the context of ‘Green Finance Instruments, FinTech, and Investment Strategies: Sustainable Portfolio Management in the Post-COVID Era’ a Springer publication from the editors, Nader Naifar, and Ahmed Elsayed (2023). “Over the last few years, ﬁnancial technology (FinTech) has been considered one of the most topical areas in the global ﬁnancial services industry. The development of distributed ledger technology, big data, smart contract, peer-to-peer lending platforms, biometrics, and new digital has motivated innovation in the ﬁnancial services industry and the development of new ﬁnancing and investment strategies.” Environment, Sustainability and Governance considerations seem to outweigh the investment and financing decisions.

Powel in his address at the International Symposium on Central Bank Independence organised by the Swedish Central bank in Stockholm in January 2023, clearly said that Fed will not be, a ‘climate policy maker’. Contrastingly, the RBI in its latest Report on Currency and Banking made a case for active role for the bankers in climate change. Its Deputy Governor, M. Rajeshwar Rao addressing a panel discussion on ‘Climate Implications for Central Banking’, however, says: “climate change poses serious threat to our long-term growth and prosperity. It has potential to create shocks to monetary stability, growth, financial stability, the safety, and soundness of regulated entities.

Indian Banks are well tuned to the above trends. Lesser branches, more digitization, more profits, more investment banking and wealth management services, more sales of third party products, more mergers and acquisitions, more privatisations would make the bank balance sheets great and they bulge in profits. Banks are rushing to finance the NBFCs that have FINTECHs are the pit shops for small loans. NBFCs along with them charted out the path for retail lending through online shopping by the customers. Have a GST registration, the client gets a loan. But in countries like ours where basic literacy, let alone digital literacy still dominates, should our banking concerns be more on improving the quality of life of the poor or enhancing the rich? The mix of social banking and profit banking seem blurred now. Governor Shaktikant Das warned the banks more than once that there is a bomb ticking in the retail loans.

SYSTEMIC RISKS ON THE RISE

India Finance Report 2023 of Centre for Advanced Financial Research and Learning (CAFRAL) raises concerns about systemic contagion due to the rise in lending to NBFCs and underscores the need for preventive measures to prevent such contagion risks when it says: “Although current ratios post-2017 show lower liquidity risk, they are not a good gauge for systemic risk — the risk which arises due to externalities that individual firms do not take into account in their decision-making process, and an unravelling of which can have deleterious effects on the real economy.” Businesses in tranquil times are going to be different from times of turmoil or shocks, an observation similar to that of the World Bank blog authors.

High interest rates have come to stay with the banks ever since the hawkish look of the RBI continued for over a year now. ‘The State of Economy Survey’ by the RBI 2023 says the share of loans below 8 percent has come down drastically from 53 percent in March 2022 to 18 percent in June 2023, while that of over 10 percent rate has risen to 34 percent, from 22 percent over this period. Net interest margins of all the banks are looking southwards with the banks competing with each other to attract the deposits parcelling out into different time periods and different buckets. High risk infrastructure lending, real estate and housing and retail loans occupy their assets portfolio. The armchair lending or lazy banking has become a necessity with Indian banks.

GLOBAL BANKING TRENDS

Global Banking Review, 2023 of McKinsey vindicates these trends even globally where it says that the banks are at the tipping point, while admitting that after 2007, banks are in great-going mood. “Below the surface, too, much has changed: balance sheets and transactions have increasingly moved out of traditional banks to nontraditional institutions and to parts of the market that are capital light and often differently regulated—for example, to digital payment specialists and private markets, including alternative asset management firms. While the growth of assets under management outside of banks’ balance sheets is not new, our analysis suggests that the traditional core of the banking sector—the balance sheet—now finds itself at a tipping point. For example, between 2015 and 2022, more than 70 percent of the net increase of financial funds ended up not on banking balance sheets, but held by insurance and pension funds, sovereign wealth funds and public pension funds, private capital, and other alternative investments, as well as retail and institutional investors.”

The silver lining is the report of the CARE Edge Debt Quality Rating Index that captures the health of credit markets. According to this report, the index improved from 92.56 in June 2022 to 93.79 and mentioned that such improvement is happening on a month-on-month basis from November 2021. Credit growth for the current year is slated to be around 13-13.5 percent. Amidst all this Indian payment systems scored a century post-Covid. The UPI spends saw a hopping growth of 428 percent during a short period of five years zooming from Rs.2.20lakh crores to Rs.15.3lakh crores according to the RBI September 2023 data. In August 2023, the UPI transactions hit 10 billion for the first time in the month of August 2023!!

This has to be taken with a grain of salt if not a ton of it. Banks wrote off Rs.25lakh crores during the last nine years and recovered barely 10 percent of it. In a hard hitting article in Money Life of October 2023, Debashis Basu argued : “The fact is that creditors have only been able to realise 17% of claims through the IBC process. A reply to a Right to Information (RTI) query reveals that the government has written off Rs10.41 lakh crore as bad loans since 2014. The reason for this is rampant fraud and corruption involving PSBs, leading to IBC cases. Fraud is pre-planned so that there is very little realisable value.” Toxic assets cannot be sold any longer into the markets.(https://www.moneylife.in/article/how-to-loot-the-public-sector-banks/72375.html In a recent revelation, Banks seemed to have written off Rs.25lakh crores and only 10-12 percent of such written-off amount was recovered subsequently.

Despite state-of-the-art technologies claimed by the banks in their operations, we observe bank staff sit for late hours and all the KYC forms and the evidential documents are taken in the printed forms and they are uploaded to the system by the banks after the business hours. There are many other operations that they do after the business hours, to the curse of their families. Customers are aggrieved in several cases as revealed by the numerous cases lodged with the Banking Ombudsmen of the RBI as the banks chose to address the complaints only on their templated formats and not on the basis of actual grievance.

The Financial Stability Report of the RBI in June 2023 mentioned: “ Confidence runs became intensified by mobile apps and social media. These developments presented new dimensions in the interface between macroeconomic and financial stability.” The Report also dew important lessons: Resolution of contagion demand swift and forceful interventions by public authorities; distinction between the systemic and non-systemic banks need re-thinking; partial deposit insurance is a dichotomy that may not work in banking crisis; a revisit of excessive banking regulations in the context of the speed of modern-day bank-runs; and finally, intrusive and comprehensive bank supervision alongside sound risk management by the banks to improve the banks’ resilience.

‘Buoyed by both by private and public investment, private and government consumption demand, rising consumer and business optimism’, India’s expected consistent growth of GDP and the forecast of IMF, World Bank, and the rating agencies like the S&P, Fitch, demand a robust banking as its backbone. After all, bad banking and good economy can never go together.

THE DICHOTOMY

Notwithstanding the transitions that India is witnessing in the alchemy of growth and the fast inroads of Artificial Intelligence, Machine Learning, robot technology both in the primary and secondary sectors, technology risks and cyber risks are accelerating at geometrical progression during the last few years. We are at a point of no-return to our traditional strengths. The culture of interdependence, respect for healthy conflict in democracy and the roots of federal structure seem to be under severe threat. Can cultural diversities and social inequalities in 33 states of India with multiple languages and dialects be addressed through digital banking?

The above analysis begs the question how is Indian banking prepared to cushion the future where the expectations that banks should also take care of climate-resilient credit interventions? Is their mindset of bulging balance sheets, overconfidence in their digital interventions, with their focus more on the shareholder value than on the customer value likely to enable any future-proof interventions? Re-inventing the systems and change in the mindsets of policy makers require intense public consultation and high levels of tolerance to adversarial views. We have to put an end to the obscene compensations of the financial and private sector chieftains. Development and expansion are imperative but not at the cost of welfare. Wealthy makes more headlines than the ameliorative measures of the poor and downtrodden as we have to keep in mind not the percentage of poor but actual poor, still at around 220-250million, equal to at least another 80 nations in the world. (https://www.worldometers.info/world-population/population-by-country/)

*The author is and economist and risk management specialist. The Views are personal. The author can be reached at yerramraju67@outlook.com

Published in Telangana Today ‘REWIND’ page on 19.11.2023.

Tradital Banking, Concept Banking to Digital Banking in India – An Arduous Journey

January 30, 2023Uncategorizedbanking reforms, commerccial banking, concept banking, digital banking, digital currency, good governance, MSMEs, nationalisation of banks, non-performingassets, RBI, SBIyerramr

Economic Survey will be tabled on the 31^st January 2023 in the Parliament. It would hopefully cover the story of banking. Strategy Wing of the World Economic Forum holding Davos Conference now recently predicted the comeback of traditional banks. The context is that banks have become digital-savvy and customer-distant. This article briefly examines the journey of commercial banks and whether there exists a scope for such comeback in India.

Digital Banking matured in India to a degree that Indian banks no longer believe that they should physically reach out to the customers through traditional bank branches. Several studies indicate that Indian banks have a long way to go in terms of good governance, asset health, and responsible banking.

Barefoot banking left India with the ushering in of banking reforms, profit-drive, universal banking, and aggressive computerization in 2000.

Post 2000, banking became all pervasive, inclusive, and embraced technology seamlessly. Direct benefit transfers for most government schemes took place and priority sector banking expanded in content and not necessarily the unreached as originally intended.

During the era of post nationalization, 1960-90, the focus was on enhancing the reach and regulatory imposition of rural-urban bank branch ratio, Credit-Deposit ratio relative to the population groups and monitoring state-wise, such ratios, poverty reduction schemes getting the commercial tinge, to mention a few.

History of Banking, an RBI publication, says “It was felt that if bank funds had to be channelled for rapid economic growth with social justice, there was no alternative to nationalisation of at least the major segment of the banking system.” Views change with the times. Globalisation and liberalisation that followed economic reforms post 1990s led to increasing privatisation of several sectors and banking is no exception. While the majorly government-owned public sector banks haven’t been privatized, the sector as a whole is getting gradually privatized.

Public sector banks (PSBs) including State Bank of India (this Bank had private shares and its Annual Meetings where auditors had to respond to the shareholder concerns, created a niche place in Indian economy serving whole-heartedly the small-scale industries, agriculture, retail trade, retail transport, and seamlessly transited to covering the financial inclusion ordains post 2005. The texture and perspective of these PSBs transformed to profit banking from social banking and digital banking with a fervour that even foreign banks in India felt the rigour of competition.

During their journey from nationalization to consolidation, a few banks like the State Bank of India, Canara Bank, Bank of India, Syndicate Bank and Andhra Bank followed concept banking when they indulged in Agriculture Development Branches, SME branches, Forex Branches, Personal Banking Service Branches. Concept Banking shaped the clientele focus.

Concept Banking

More than fifty committees and working groups of the RBI during the first decade of nationalisation followed by the CRAFICARD (Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development – Chairman: B. Siva Raman) saw the birth of National Bank for Agriculture and Rural Development (NABARD).

Average population served by a bank branch at the time of Bank Nationalisation in 1969 was 73000 that came down to 19000 in 1981. It was less than 9000 in 2004 reflecting a better reach of banking. The graph took a swift deterioration with 14,370 persons per bank branch in 2020. Public sector banks closed down 2044 branches in FY 22-23. Even the establishment of Regional Rural Banks, an extension of Concept Banking to the rural areas as an effective intervention in financial intermediation subsequent to the banking reforms took a beating.

Regional Rural Banks were established under the provisions of an ordinance passed on 26 September 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors, based on Narasimham Committee on Rural Credit during the tenure of Indira Gandhi as PM. The purpose was to include rural areas into the economic mainstream since around 70% of the Indian population was rural. The RRBs were owned by the central government, state government, and the sponsoring bank with 50%, 15%, and 35% shareholding respectively.

According to NABARD Annual statistics, the amalgamation of RRBs from 196 in FY 2004-05 to 43 in 2022 is reported to have brought about “better scale-efficiency, higher productivity, and robust financial health of RRBs”. When the purpose was to enhance the reach of banking to the rural population, and also serve their economic and financial needs efficiently, measuring them on grounds of profitability and treating them on par with commercial banks, jeopardised the raison de ‘etre of their creation. The present areas of concern is technology adoption, pension liability, and low asset quality. They are under the direct supervision of NABARD.

Small Industries Development Bank of India was set up in 1991 to guide and service the credit needs of the MSME Sector. This Development Finance Institution (DFI) has still a long way to go in such task as the sector continues to look to government of India and the state governments to meet their needs. Still, lack of and inadequate access to credit is their cry and this aspect comes up for discussion and several research studies and seminars affirm this fact. Small Finance Banks and Micro Finance institutions formed subsequent to Nachiket More Committee’s recommendations on Differentiated Banking are yet to make much difference.

The story is like Aesop’s fables. Training institutions specially set up for sensitizing the field staff and managers at one end and controllers at the other end have gone into history with transformation into ‘Learning Centres’ in a few PSBs. Cross-fertilisation of ideas, innovation in lending to inclusive sectors like agriculture took a swift adverse turn with the embrace of universal banking.

Compliance with the Basel norms and risk management have become very routinized. Audit and Inspection reports have been modified to ticking and checking instead of tending to correct the wrong practices. Public complain of corruption in banks frequently. Disorientation to the customer, limited staff, least communication with the clientele, dedication to the systems followed digital banking.

The competition sadly now is with their siblings – FINTECHs and some of the focused Non-banking Finance Companies. Where they realise that they cannot fight, they embrace them and extend a pretentious helping hand. Yet, many in the traditional banks retain their pride of supremacy!

Knowledge of banking per se travelled in a sinking ship and staff plead lack of time to read the circular instructions and online learning. Training of junior staff and new entrants is more on systems than on banking. Digital banking helped speed of transactions to the same degree as speed of frauds and misappropriations.

Despite consolidation of 28 PSBs into ten, their market share in overall bank deposits is around 54 percent in 2020. Their bad loans are bundled for transfer to the National Asset Reconstruction Company Ltd – euphoria for the bad bank. This helped them reduce the NPA portfolio significantly. Government of India had to no longer re-capitalize these banks. If these have made the banks jump in their profits, their resilience and sustainability would depend on their ability to rebuild the trust of the customers in them.

Trust deficit has been all pervasive in banking industry. Gone are the days, when the balance in the customer’s account is the most reliable figure and none could contest in court of law. Today, such balances are in a series of legal disputes. Earlier amount involved in frauds was in lakhs of rupees at the macro level and today, they are in billions.

Bankers are afraid of their shadow and they mostly look to saviours around. They are increasingly scared of the three “Cs”: Central Vigilance Commission, Central Bureau of Investigation and Comptroller-cum-Auditor General’. This fear transcended to the lowest ranks although there is little evidence of their being hounded for loans below Rs.25lakhs per enterprise!! More so, for the government-sponsored schemes.

Digital Banking

Yet, we modernized banking. With internet banking the speed of transactions enhanced tremendously. We implemented Basel III more sacredly than the western counterparts. Our regulatory mechanism was so robust that we withstood the onslaught of 2008- recession and fought the demon of inflation post 2020 with all the armoury at its command commendably.

RBI granted on-tap licensing of universal banks in the private sector, small finance banks, and payment banks. RBI introduced digital currency, as if, to prevent the devil of cryptocurrency making inroads into businesses and investments. The future of central bank digital currency in the context of low digital literacy levels would unfold new dimensions in regulations and hopefully, the PSBs, private banks, cooperative banks, SFBs, payment banks and foreign banks would mature to handle them to the advantage of customer. First the banks would learn and then they would make their customers learn the new nuances of this currency.

The journey of Indian banking from traditional to concept to digital banking has been on very rough roads and the roads are being re-carpeted. Hopefully, the electric vehicles of the RBI – CBDC, would target the unreached customers through well-monitored training of both staff and the user population, and reinforce the trust in the financial system that is eroding fast.

Good economy and bad banking cannot go together. It will be intriguing to see their performance. The story of banks in India is one of smiles and sobs. During the last decade and half, their non-performing assets and frauds scaled up. Along with this, Indian banks are getting more interested in giving out retail loans than industrial loans. Further, private banks have been gradually gaining market share.

Lending of banks stagnated at 50-53 percent of GDP since March 2009 although 67-70 percent of GDP constitute bank deposits. Indians basically look for safety and security for their money than the amount their money should keep earning. Financial education is at lower than global levels. Banks have little time to spend with their clients and customers in wealth creation in the economy. Their temptation for lazy banking increased phenomenally with retail, real estate, and housing loans taking more share than their lending to productive manufacturing sector.

Non-performing loans peaked at Rs.10.4trillion by March 2018 warranting the setting up of National Asset Reconstruction Company Ltd (NARCL)– euphemism for Bad Bank. The clean-up that we notice today is not due to loan-recovery efficiency as much as the transfer of bad loans to NARCL. In the last five financial years, Rs.1.03trillion of written-off loans were alone recovered.

The journey of banking in India from traditional banking to digital banking has been quite arduous and expensive to the exchequer. Due to low level of financial literacy, the inroads made into digital banking may be hard to sustain but require resilience. The eroding trust in banks is a bad sign for a fast growing economy like ours and shall be reversed. The solution does not lie in closure of branches as much as enhancing their functional efficiency.

*The author is a retired senior banker, economist, and risk management specialist. The views are personal. He can be reached on yerramr@gmail.com

Will India’s New Thrust on Financial Inclusion Pay off?

September 9, 2015Uncategorizedyerramr

In reply to: http://knowledge.wharton.upenn.edu/article/will-indias-new-thrust-on-financial-inclusion-pay-off/

When Jan Dhan was launched there was a flurry of activity never seen or heard before in Indian Banking industry – more particularly in the Public Sector Banks. Financial Inclusion of the nature has been on the agenda ever since 1970s when the PSBs were directed to open accounts under Differential Interest Rate Scheme – a loan up to Rs.6000 per person at interest rate of 4%. The ticket size was increased to Rs.15000 and the scheme is still in the books of banks but not implemented. In 2005, the RBI found new fervour in financial inclusion and latter helped them with two new instruments – Business Correspondents and Business Facilitators. This scheme had moderate success because of low cost off-site mobilisation of deposits in areas where brick and mortar bank branches did not exist. All these resulted in opening barely 7mn accounts till August 2014. The same banks with the call of the Prime Minister opened Jan Dhan Accounts multiples of the figure and reported Rs.2200bn as deposits. The fact is that many existing accounts qualifying the definition have been shifted into the Jan Dhan Pool. This can be gauged by the accretion of new deposits into the PSBs in such group not matching with such claims. PSBs engaged in retail banking, sme lending, corporate finance, subject to Basel III norms and other RBi regulatory compliances and having to recover huge NPAs sans Bankruptcy Law, and with human resources heavily skewed to urban and metro banking cannot be expected to be the right bogey for financial inclusion efforts. There are post offices, cooperative societies – 93200 located right away in the villages but lacking good governance and good management and freedom to function apolitically, could have been the attention of the Government. Sadly, the Finance Ministry and the Ministry of Agriculture an Cooperation (since changed to Ministry of Farmer Welfare) do not open a dialogue in this direction. They became holy cows for the NDA government to touch.
Payment Banks, the new initiative and the MFis as also the Mudra Bank Ltd., a subsidiary of SIDBI supposedly dedicated to the cause of MSME sector, is the hope of the languishing poor.

Ultra Poor Graduation: The Strongest Case so Far for Why Financial Services Must Be a Part of the Solution to Extreme Poverty

June 2, 2015Uncategorizedyerramr

The findings would depend upon the sample we choose for study although I am sure adequate care has been taken about this. Micro finance in India, at least, in Andhra Pradesh, has been accused of squeezing the poor showing them the heaven. The other window supported by the Government in the Self Help Group bank linkage program, the results have been mixed; there are several SHGs that have not created any durable assets and turned out to be money lenders with the help of subsidised financial assets.