Most of the NBFCs do not take public deposits but that does not mean they cannot create systemic risks. The banking system has at least Rs 57,000 crore exposure to IL&FS. Haven't the banks invested public money in IL&FS papers, asks Tamal Bandyopadhyay.
The origin of the challenge is the so-called "fresh start" process. Many in the MFI industry apprehend that such a law in India will encourage small unsecured borrowers to default and destroy the credit culture. So, while'Fresh start' is a welcome step as it will free up the debtors from the archaic laws of the colonial era, debtors need handholding and counselling to prevent any misuse, says Tamal Bandyopadhyay.
'In their over-enthusiasm to clean up the system, both the banks and the regulator should not forget that the key to the insolvency law is revival of companies -- recovery of bank dues is an offshoot of that,' points out Tamal Bandyopadhyay.
If indeed the gate opens for big industrial houses, the RBI needs to be smarter than them and demonstrate it through action, not reaction, observes Tamal Bandyopadhyay.
The RBI wants to include shares and options within the variable salary of the CEOs, proposed to be capped at 200 per cent of their fixed salary; the floor for it is 50 per cent.
Apart from navigating the bank through the Covid crisis, Jagdishan may also have to deal with the latest development on the auto loan lending practice scam. He will be expected to deliver consistent profit growth of 20 per cent-plus quarter after quarter, irrespective of the operating environment.
The annual earnings of a non-executive chairman of a PSB is capped at Rs 10 lakh, inclusive of fees for attending board meetings. This is way below the compensation of the chairman of any private bank, reveals Tamal Bandyopadhyay.
While IDBI Bank's 140 million customers and 1800-odd branches will come in handy for LIC to hawk insurance, the bank can use LIC's massive agent network to sell its retail loans. But if it is run the same way it had been in the past and LIC is a proxy of the government, then it has no future, says Tamal Bandyopadhyay.
Banking is a boring business but still the banker should enjoy it as fancy awards and cozy relationships with politicians, Bollywood stars and corporate honchos cannot save them if the job is not done properly. In the concluding part of the series Tamal Bandyopadhyay wonders how long Kochhar would need to wait for her redemption or downfall and atonement.
In the first of a two-part series, Tamal Bandyopadhyay explains why the ICICI Bank's board first rushed to deny all allegations against Kochhar and then took the extreme steps against her.
What connects P S Jayakumar of Bank of Baroda, V Vaidyanathan of Capital First Ltd and Chandra Shekhar Ghosh of Bandhan?
If indeed the issues involved between the government and RBI are of immense public interest, why not make public the arguments of both the government and the RBI, irrespective of the outcome of the process, says Tamal Bandyopadhyay.However, the Act is silent on what happens if the governor's views differ from that of the government. If Patel does not want to budge from his stance the government can either see merit in the Governor's arguments and decide against going ahead with its plan or overrule him. My guess is that the issues raised by the government need to be sorted out not at the November 19 board meeting but between the Governor and the government, says Tamal Bandyopadhyay.
The choice clearly is between prompt corrective action and slow but sure destruction, says Tamal Bandyopadhyay.
Heads of various public and private sector banks on Thursday sought to present a counter-narrative on RBI Governor Shaktikanta Das warning lenders about the perils of extreme risk aversion in the pandemic-stricken environment where credit demand is on the wane.
Interview with Tamal Bandyopadhyay, the author of Sahara: The Untold Story.
'Banking is a business of trust.'
Tamal Bandyopadhyay offers some unsolicited advice for a government wh,ich came to power, with brute majority and the nation's pragmatic chief money man.
'I was shocked by the kidnapping episode. I could have lost my life.'
'Initially, Gift City was just another real estate project, but all that changed with Modi moving to New Delhi,' notes Tamal Bandyopadhyay.
Is the RBI unable to accept with grace that beyond 55, one can have the ability to head the compliance functions in a bank, asks Tamal Bandyopadhyay.
'There are deeper, underlying, forces at work and we need institutional arrangements to guard against them.'
It is difficult to say if the banking sector will see the worst behind it by March 2020, warns Tamal Bandyopadhyay.
'No commercial bank will be allowed to fail. There is nothing to worry about.'
'Should the government be in the business of running banks?' 'Particularly when it does not have the fiscal strength to continuously infuse capital into such banks?'
'Those who come from outside are surprised at the relatively small strength of the RBI supervisory cadre, relative to the needs of the country and the needs of the financial sector.'
'Clearly, the depositors of cooperative banks need the maximum protection.'
Tamal Bandyopadhyay details HDFC Bank's digital journey.
Tamal Bandyopadhyay, columnist and author of several books like From Lehman to Demonetisation: A Decade of Disruptions and Sahara: The Untold Story, tells Rediff.com why Yes Bank depositors should not panic and the current crisis at India's fifth largest private lender does not pose any systemic risk.
'There are many cases where a company hits the wall because of reasons not under their control.' 'If you do not understand and appreciate that and paint all promoters with the same brush then definitely you are inviting trouble.'
'Public sector banks are like an extended arm of the government.' 'They rush to rescue certain sectors or they rush to invest in certain sectors to prop up the economy which the private banks don't.'
'She was either overconfident that nothing will happen to her or she underestimated the gravity of the allegations.'
Most adult Indians should have access to bank deposits, credit and remittance facilities as well as insurance and mutual fund products in the next decade, and technology will play a big role in this transformation, says Tamal Bandyopadhyay.
Tamal Bandyopadhyay discusses his latest book Bandhan: The Making of a Bank at Bandhan headquarters in Kolkata.
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