Only Rs
7,000 per Family
?
Gujarat Samachar ( 25 Oct 2017 ) carries
following news report :
( loosely translated by me
from Gujarati )
“ To bail out Public Sector
Banks , each and every family will need to fork out Rs 7,000
Banks may not lend to citizens but citizens must pay
This amount ( Rs
2.11 lakh*crore ) will have to come from the government treasury . That
means , this is tax-payers’ money !
Finance Minister calls this a “ Bold Step “
!
In normal course , banks are supposed to help out the citizens but
, in India , it is other way around !
That is not a “ Bold
Step “ !
At present there are 30 crore “ families “ in our country . Hence
this bail out works out to Rs 7,000 per family
So , this amount will get transferred to these bankrupt banks without
the knowledge of these families
So what is government doing ?
Transferring citizen’s tax-money instead of reforming the bank administration !
This will only lead to worsening of their
position
This has happened earlier also . History
repeats without banks mending their ways !
If they are guaranteed repeated bail out
, where is their incentive to improve ?
In the end ,
only the tax payers will foot the bill
More than 2 years ago , I
sent the following blog to the Policy Makers :
Tuesday, 23 June 2015
Bank Re-Capitalization ?
Here is a layman's understanding :
* Bank executives give Rs 4 Lakh Crores worth loans to Industrialists / Businessmen ( who , sometimes happen to be close relatives / friends )
* Bankers " forget " to examine past records of loan-repayments by these individuals
* Banks do not share among themselves info about " black-listed " borrowers
* Banks " forget " to inquire if a loanee is a " Benami " company
* Banks do not incorporate stringent clauses in loan agreements (on purpose )
* Banks adopt " Forget & Forgive " approach to defaulters
* For loan recovery , bankers wait for other bankers to take the lead
* Before taking action , bankers check-out with people in power
* When sinking under the burden of NPA , bankers run to Government of India to bail
them out through " Bank Re-Capitalization
"
* Government oblige by giving money to stressed banks, so that they can survive
* Government rationalize its bail out by saying, " depositors must be protected " .
Sounds so reassuring !
* Government then goes out and raises taxes ( direct + indirect ) to balance its books (
Current Account Deficit ? )
In a nutshell :
* Eventually , honest tax-payers foot the bill, one way or the other
* 7,000 + loan-defaulting swindlers spend vacation in Switzerland with family ( and
their politician friends ) - till they are
ready to borrow more !
* Bankers vie with each other to " Re-Schedule Payments " and advance fresh loans to
pay off old loans ( Rs 4 lakh Crores of NPA
).
If EU / IMF can do this for Greece , why
cannot we ?
* Government will take pride in " Bold Banking Reforms "( to please IMF ? )
* As a Nation , we are very compassionate ! We cannot let any institution die !
We are obsessed with keeping it alive at any cost . We must, forever, keep it alive
with
artificial ventilation / blood transfusion !
It is time to re-think :
When a person or an Institution just cannot be kept alive , it must be allowed to die ,
in a dignified way !
Would it not be far better to protect the small bank-depositors by returning their
deposits , rather than infuse Rs
4 lakh Crores into these banks , by way of re-
capitalization ?
Am I missing out on something that economists know better ?
25 Oct
2017
www.hemenparekh.in / blogs
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