It has become increasingly difficult to keep tabs on interesting articles I read. Almost always when I need to reference them, I am unable to find those. I started using Zotero to keep references but I also want to write some short comments on the articles so I remember what thoughts were triggered by the article. Hence I am starting this series as a personal bookmarking feature.
Interesting readings for today
PNB/Nirav Modi/Chokshi scam coverage claims highlights.
Mint did a basic profile of Nirav Modi - Who is Nirav Modi, the man linked to $1.77 billion PNB fraud? It is short but interesting.
Mint did a basic profile of Nirav Modi - Who is Nirav Modi, the man linked to $1.77 billion PNB fraud? It is short but interesting.
Tamal Bandyopadhyay answers basic questions about The anatomy of the PNB fraud. This follows a short but smart note by Deepak Shenoy titled How The 11,400 cr. Import Ponzi Scam at PNB Unfolded. Both are must read.
Once investigations start then skeletons will tumble out. Shasswati Das from Mint writes Shell firms, benami assets on the radar amid fresh raids on Nirav Modi, Choksi.
investigating agency and the income-tax department have zeroed in on 200 shell companies—both in India and overseas—that were being used to receive funds as part of the alleged fraud, in order to create benami assets in the form of land, gold and precious stones.
I cannot believe there is only one culpable officer and one errant company (or one bunch). There must be more officers involved and surely more companies using similar modus operandi.
Bank Stability
Fourth and finally, I would like to quote this important paragraph from the Financial System Stability Assessment Programme for India done by the International Monetary Fund (IMF) and published in December 2017: “India’s key banks appear resilient, but the system is subject to considerable vulnerabilities. Stress tests show that while the largest banks are sufficiently capitalized and profitable to withstand a deterioration in economic conditions, a group of public sector banks (PSBs) are highly vulnerable to further declines in asset quality and higher provisioning needs. Capital needs range from 0.75% of GDP in the baseline to 1.5% of GDP in the severe adverse scenario.”
The IMF added: “The authorities recently announced a recapitalization plan for the PSBs amounting to approximately 1.3% of GDP, as well as the establishment of a mechanism to seek consolidation across these banks.... This recapitalization package will effectively address the capital gap assessed in the FSAP (Financial Sector Assessment Programme) exercise even under the severe stress scenario.”
Mihir Sharma takes the attack on Government ownership in his Bloomberg Quint article State Control Has Opened India's Banks to Fraud. He is not wrong. But the next logical step in this process is not fully correct. Debashis Basu highlights it. He believes if we change ownership - i.e. sell off the banks then the problem will go away. [Behind paywall] I am all for private banking. The government needs to own just one bank - State Bank of India - rest can be privatized. The reasons for this one exception is a topic for another post. However, I am not in favour of selling banks or any PSUs at this stage. The best way is to turn it around and then sell it. The assets of people should fetch full value.
Ila Patnaik discusses some other solutions in addition to bank privatisation in her article titled Lessons from a fraud. They include improving bond market, small savings scheme, increase deposit insurance cap and narrow banking. Read the quote about narrow banking:
Fourth, if the government decides that PSBs should offer risk-free deposits above the cap on deposit insurance they should be allowed to invest only in government bonds, or, do “narrow banking”. Then the implicit sovereign guarantee could effectively turn into explicit sovereign guarantee. The business of giving loans, making decisions, figuring out risk management systems, hiring competent staff, provisioning for bad loans, creating mechanisms for accountability and punishing management when systems fail can be left to private banks. Today the taxpayer pays when PSBs fail to perform these functions properly. Narrow banking by PSBs can take this burden away from the taxpayer.
Ajay Shah, as is his wont, targets the RBI in this Business Standard artcile - First, build a capable RBI. V Ananthnageswaran counters this in his post Problem disguised as solution!
World-War watch
Building maritime capacity in South-East Asia
Article by Swee Lean Collin Koh says many important things.
Article by Swee Lean Collin Koh says many important things.
What New Delhi has in South-East Asia is what Beijing has only in the past decade started doing and so far not yet accomplished in the Indian Ocean
Other things
Municipal corporations are increasingly offering through app services such as online ticketing booking and local services that has have so far been the reserve of start-ups such as UrbanClap, Quikr and Housejoy
The services that should be provided by public bodies cannot be abdicated to private players. However, public bodies may find it difficult to design the most optimum solutions to public service delivery. I prefer the PPP model here - DBOOT -or design build Operate own and transfer.
In this article Vrinda Bhandari, Amba Kak, Smriti Parsheera, Faiza Rahman and Renuka Sane from NIPFP submit their suggestions for The Justice Srikrishna Committee developing comprehensive cross-sectoral data protection law for India.
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