Iraq crisis: Obama says no to sending American combat troops

American forces will not be returning to combat in Iraq, but we will help Iraqis.  The US will help the country with 'targeted and precise military action' if required, says Obama

US President Barack Obama has made it clear that American combat troops will not return to Iraq to fight Islamic militants, who have seized a section of the country. He, however, assured Baghdad of launching 'targeted and precise military action' if required.


“American forces will not be returning to combat in Iraq, but we will help Iraqis as they take the fight to terrorists who threaten the Iraqi people, the region, and American interests as well,” Obama told reporters at a news conference after meeting with his top national security advisors.


He said, “We do not have the ability to simply solve this problem by sending in tens of thousands of troops and committing the kinds of blood and treasure that has already been expended in Iraq. Ultimately, this is something that is going to have to be solved by the Iraqis”.


Iraq had requested the US to help under the security agreement (between the two countries), and to conduct air strikes on the militants of the Islamic State of Iraq and Syria (ISIS), who have seized the country’s second largest city of Mosul and advancing towards the capital.


“It is in our national security interests not to see an all-out civil war inside of Iraq, not just for humanitarian reasons, but because that ultimately can be destabilising throughout the region,” Obama said even as he noted that he is prepared to carry on targeted and precision strikes.


“We will be prepared to take targeted and precise military action if and when we determine that the situation on the ground requires it,” he said.


The US, he said, also has an interest in making sure that there is no safe haven that continues to grow for Islamic State of Iraq and the Levant (ISIL) and other extremist jihadi groups who could use that as a base of operations for planning and targeting US.


“If they accumulate more money, they accumulate more ammunition, more military capability, larger numbers, that poses great dangers not just to allies of ours like Jordan, which is very close by, but it also poses... a great danger, potentially, to Europe and ultimately the US,” he warned.


US Secretary of State John Kerry said the US is committed to fight back the militants who are inching closer to Baghdad, but America’s efforts would be successful only if Iraqi leaders embrace a political process shunning differences.


He said the efforts made by the US “will only be successful if Iraqi leaders rise above their differences and embrace a political plan that defines Iraq’s future through the political process, not through insurgency and conflict.”


Meanwhile, Sunni radicals in Iraq, who have overrun a swathe of territory north of Baghdad in a lightning offensive, have taken control of one of Saddam Hussein’s former chemical weapons factories.


“We are aware that the ISIL has occupied the Al Muthanna complex,” State Department spokeswoman Jen Psaki said in a statement.


But she said she didn’t think the ISIL militants would be able to produce usable chemical weapons there, because any materials remaining are old and unwieldy.


SEBI asks Rose Valley to wind up scheme, pay investors

The market regulator has once again barred Rose Valley from collecting money as investment in real estate and construction and repay the money collected from investors within three months

Market regulator Securities and Exchange Board of India (SEBI) has asked West Bengal-based Rose Valley Real Estate and Construction Ltd to wind up its collective investment schemes (CIS), issued through its real estate and construction unit, and repay money to investors within three months.


SEBI in an order, said, “….Rose Valley Real Estates and Constructions Ltd and its promoters/ directors, Gautam Kundu, Shibamoy Dutta, Ram Lal Goswami, Abir Kundu and Ashok Kumar Saha are directed to not to access the securities market and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market till all collective investment schemes launched by Rose Valley Real Estates and Constructions Ltd are wound up and all the monies mobilised through it are refunded to the investors”.


Apart from these, Rose Valley has been asked to submit the 'trail of funds claimed to be refunded, “bank account statements indicating refund” to investors and “receipt from the investors acknowledging such refund.”


According to the SEBI order, the money collected by RVRECL through a scheme called 'Ashirbad' has increased to Rs2,016.32 crore from Rs1,358 crore during 1 April 2010 to 31 March 2011.


The scheme, SEBI points out, falls within the purview of the “collective investment scheme” definition of the market regulator.


Rose Valley had claimed that the CIS was discontinued in 2010.


Earlier in January 2011, SEBI had barred Rose Valley Real Estates & Construction from raising money from the public. The company was raising funds from the public in certain areas of West Bengal in the name of sale of plots of land under its Ashirbad scheme.


A Rose Valley spokesperson has however claimed that it will move to Special Appellate Tribunal (SAT) against the SEBI order. It would also question the figure of Rs2,000 crore of deposits that the market regulator claims it to have raised, says a report from the Hindu Business Line.


“Repayments are made every day and at present the company is yet to pay Rs175 crore of an earlier mentioned amount of Rs1,274 crore. The repayment would be made over the next three months in accordance with the SEBI order,” he said adding that there hasn’t been a single investor complaint against the company on non-repayment of dues.


However, SEBI in its order has mentioned that Rose Valley has till date not provided any documentary evidence to substantiate its claim that it has refunded the money to the investors.


Building a Better India – Part 10: Restructuring banking system

Small borrowers immediately have their collaterals confiscated on default, but big industrial borrowers don't seem to suffer the same fate

The state of India's banking system does not garner as much attention as it should. With our layers upon layers of public sector banks and lending practices, our banking system is heading into troubled waters, if something drastic is not done soon.

Consolidation of public sector banks

All 26 public sector banks including State Bank of India (SBI) and it’s subsidiaries and associates should be merged and consolidated into 6 Banks as under:-

  A.   Central India Bank Ltd. 
  B.   North India Bank Ltd.

  C.   South India Bank Ltd. 
  D.  West India Bank Ltd.

  E.   East India Bank Ltd.       
  F.  North Eastern India Bank Ltd.

The initial cost of such consolidation will pay back handsomely in no time, in terms of better efficiency, lesser operational costs and scale of operations besides other benefits.

RBI's core functions:

Reserve Bank of India (RBI) has to perform multiple and numerous functions single handily and is extremely overburdened despite having one full time Governor and four Deputy Governors.

It may be better if some of its following secondary functions are devolved upon a separate banking & financial regulatory authority.

a. Regulation and control of regional rural banks.

b. Co-operative rural banks.

c. Regulation and control of chit fund and Nidhi companies, money circulating and mobilising schemes.

d. Regulation of micro finance companies and gold finance companies.

e. Regulation and control of non banking finance companies etc.

Massive irregularities in disbursement of loans by PSU banks

Financial Express reported in March that for every rupee lent by banks in India, 13 paise have turned into bad loans. No strict actions seem to be forthcoming for the known defaulters or the bankers. Especially considering that small borrowers immediately have their collaterals confiscated on default, but big industrial borrowers don't seem to suffer the same fate.

The various and scattered laws on banks and financial institutions as under should be consolidated in to two laws namely INDIAN BANKING ACT  and  INDIAN FINANCIAL INSTITUITIONS ACT, with adequate and effective provisions, and strict rules for quick recovery of bad or sticky loans.

1. Banker’s books evidence act 1891

2. Agriculturist loans act 1884

3. Banking regulation act 1949
4. IDBI bank act 1964

5. State bank of INDIA act 1955    
6. SBI (subsidiary banks) act 1

7. State bank of Hyderabad act 195 
8. State associated banks act 1

9. Exim bank act 1981       
10. National housing bank act

11. Regional rural banks act 1976    
12. SIDBI Act 198

13. Banking Companies acquisition and transfer act 1970/1980

14. State financial corporation act 1951
15. Unit trust of INDIA act

16. Recovery of Debts due to Banks & Financial Institution Act, 1993

17. Securitization and Reconstruction of financial Assets and Enforcement rules 2002

The nexus between bankers and businessmen needs to be broken or atleast addressed, Moneylife has written before about how rising NPAs are affecting the solvency of India's prestigious public sector banks. For a more detailed view on this specific issue please read our previous article here.

You may also want to read...
Building a Better India-Part1: How to create a smaller and smarter government
Building a Better India-Part2: Transforming political landscape
Building a Better India – Part 3: Bringing systemic changes in constitutional bodies
Building a Better India – Part 4: Identifying tax issues
Building a Better India – Part 5: Bringing tax reforms

Building a Better India – Part 6: Fast track clearances

Building a Better India – Part 7: Managing India's Deficit

Building a Better India – Part 8: Boosting Coal Production

Building a Better India – Part 9: Boosting Hospitality and Tourism

(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess)



Shreekanth Prabhu

2 years ago

I feel Banks should be divided as per role. Some banks may cater only to large number of low-income customers. Some others cater to salaried class. Yet another to businesses. All the lending to high risk/project/infrastructure should be done by an investment bank.

Customer facing banks in turn should lend to Investment bank. There should also be a bank that is focused on Government lending and finances. It may also be good to encourage peer-to-peer lending, social banking and crowd lending of unsecured loans, thereby expanding debt markets, reduce role of money lenders. This may also reduce pressure on PSBs to lend to public sector. All high risk loans should be insured, thereby a single agency can do a better assessment of risks. A businessman habitually/willfully defaults will have to pay an unaffordable risk premium. Interest incomes of retail customers, pensioners should not be taxed. Even this may apply to businesses. Banks should pay a flat 1% interest as service tax for the entire corpus of deposits held by them to the Government.


Shreekanth Prabhu

In Reply to Shreekanth Prabhu 2 years ago

I meant priority sector in place of public sector.

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