Sunday, May 05, 2013

SUBSIDIZING PRIVATE BANKS?




When the government announced a scheme aimed at putting cash into BPL hands for two square meals a day, a cacophony of learned corporate intellectuals pontificated over the evil of such hand outs to the poor.
Better, it was argued, to give that money to entrepreneurs and industrialists to set up units to provide jobs, instead of food protection.
Many wondered whether that might not be a more effective way of taking the country forward.  
But then how many businessmen actually use their own money to start business? And are the numbers of jobs created worth the number of crores from public money in the banks?  
Also does industry really run on its own?
The answer is a big NO, as evident from the enunciations of banking heavyweights from the private sector, the head honchos of the private banks who consider themselves a cut above nationalized banks and of SEBI, the bastion of those with investable surpluses.
On May 3rd, 2013, the Reserve Bank of India announced a cut in the repo rate, no doubt hoping to spark of a revival in the flagging economy.
But from SEBI and the private banks, there was a loud  NIX.
The SEBI chairman wanted post office rates and statutory liquid ratios to come down first.
The CEO,HDFC wanted liquidity to improve with government spending and FII inflows before his bank could do anything.
The Citibank CEO wanted more government, public and private sector spending to happen with improved liquidity first.
And the CEO, ICICI bank said that deposit rates would not come down unless the deposit growth rates and seasonal demand improves.

What does all this mean?   That banks and industrialists need constant  bottle feeds of government assistance, even as they begrudge the poorest of the poor some food, while they indulge in their world class luxury brands. 
Perhaps we’ll reach the Top Ten Table only when we learn to carry all with us.

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