Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do. There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Now as I approach my 90th birthday ( 27 June 2023 ) , I invite you to visit my Digital Avatar ( www.hemenparekh.ai ) – and continue chatting with me , even when I am no more here physically

Wednesday, 25 October 2017

#BankRecapitalization

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




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