Citizens' Issues
Maharashtra gives toll relief to light vehicles
The Maharashtra government has decided to scrap toll for light motor vehicles and state transport buses at 53 toll tax plazas in the state, Chief Minister Devendra Fadnavis announced here on Friday.
 
Besides, 12 toll plazas in the state will be shutdown permanently by next month, Fadnavis said in the assembly amidst thumping of desks.
 
However, this crucial decision will not apply to Mumbai's five entry and exit points, the Mumbai-Pune Expressway - top money-spinners in the state, and the toll plazas in Kolhapur.
 
PWD Minister Eknath Shinde told reporters that by this decision, the government will incur an additional burden of around Rs.5 billion per annum which it would reimburse to the Maharashtra State Roads Development Corporation and the Maharashtra Public Works Department.
 
As far as the Mumbai entry and exit points and the Mumbai-Pune Expressway are concerned, he said around 90 percent users are small vehicles so it entailed different calculations and a decision on it would be announced by July 31.
 
According to official estimates, the Mumbai entry and exit points at Dahisar, Thane, Mulund, Airoli and Vashi alone account for a staggering revenue of over Rs.4,000 crore per annum.
 
About Kolhapur toll plazas, a committee headed by Eknath Shinde would study and submit its report and recommendations by May 31.
 
The state government also plans to implement a new toll tax policy from June 1.
 
Shinde described this as a "fulfilment" of the ruling Bharatiya Janata Party-Shiv Sena alliance's poll promise.

User

Real Estate Bill: No accountability for government agencies?
The Real Estate Bill passed by the Modi cabinet, would bring some accountability among realty players. However, government agencies whose slow approval processes delay projects, would remain as unaccountable as before
 
The union cabinet, chaired by Prime Minister Narendra Modi, on Tuesday gave its approval to amendments to the Real Estate (Regulation and Development) Bill, 2013 pending in the Rajya Sabha. The Bill will help reduce numbers of one-time builders and developers as well bring in transparency and accountability in realty segment deals. However, at the same time, it fails to include or hold accountable, government agencies whose slow approval processes   contribute to project delays.
 
Two of the major changes in the Bill are reduction in the amount deposited by developer and bringing in commercial properties into its ambit. The minimum balance to be maintained in the escrow account of a project has been reduced to 50% from 70%. This amount from the monies collected from the buyers must be placed in an escrow account within 15 days.
 
However, this will allow developers to continue the practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land or project portfolio. The result will be buyers will be more worried due to the fund diversion.
 
Other revisions include bringing in commercial projects under the purview of the bill, which will provide protection to investors of commercial assets. In addition, brokers and agents have been now been included under the purview as well, and are effectively rendered punishable in case of non-compliance with the Authority's and Tribunal ruling.
 
All under-construction projects have to be compulsorily registered within three months of setting up of the Regulator, and developer cannot make changes to original plans or the structural design unless he gets the consent of two-thirds of the customers.
 
If the developer fails to register the project within the prescribed time, he will have to pay a penalty of 10% of the overall project cost and an additional penalty of 10% penalty and/or a three-year prison term in case of continued non-compliance. Incorrect or incomplete disclosures will attract a penalty of 5% of the project cost. Continued non-compliance can lead to project cancellation as well.
 
Consumers can approach other forums for justice
In the previous Bill, the consumers had no other forums to go for justice except the Real Estate Regulatory Authority’ (RERA) and Real Estate Appellate Tribunal (REAT). Such a stance may have lead to pressure on this regulatory body in terms of an increased log of cases, though it would certainly reduce instances of multiplicity of suits. 
 
This clause has been done away with in the version that the Modi cabinet has cleared. This means customers can now seek recourse with consumer courts and forums as well. All projects which have not received their completion certificates will also be now covered under the bill, so it now allows bigger umbrella coverage for buyers and investors.
 
Key pointers about the Bill 
1. Applicability - Applicable to new residential and commercial projects having developable area of 1,000 metres or more
 
2. Detailed Information sharing - Detailed Information to be shared by the builders about the project, land and bank details prior to launch of any new project
 
3. Escrow Account - Minimum 50% of the receipts to be kept in escrow account for construction expense.
 
4. Higher Transparency and credibility for the sector
 
a. Project to start only once all applicable approvals are in place
 
b. Builder can’t change the building plan and structural designs without consent of 2/3rd of the buyers.
 
c. Not more than 10% of the cost to be taken as advance till formal agreement is signed
 
d. Structural defect found within two years of possession to be corrected by the builder at no extra cost
 
e. Grievance redressal mechanism to be in place in each state for quick resolution of related issues and better after sales service by builders
 
5. Land being a state subject, States are required to make rules in this regard within one year. The act provides that two or more states may choose to appoint single regulator
 
In June 2013, while speaking at the Moneylife Foundation seminar, Parimal Shroff, the top real estate lawyer in Mumbai, pointed out that the Central Act is “too ambitious”. He said, the functions of RERA includes administrative, advisory, executive, judicial and regulatory and it needs to be rationalised as it can be overburden by solving smallest to largest issues across the country.
 
In addition, the state governments are expected to establish REAT to hear appeals from the orders or decisions or directions of the authority and the adjudicating officer. The REAT should be headed by a sitting or retired Judge of the high court with one judicial and one administrative or technical member. This is also not practical, especially looking at the dearth of high court judges today.
 
 
One of the issues that could put brakes on setting up RERA and the REAT is the cost factor. As per the Bill, the state government should set up RERA and tribunals. However, the states would be too reluctant to bear the financial burden on setting up these huge authorities, unless the Centre provides sufficient funding. 
 
The Bill also fails to mention wilful defaults and is silent on unaccounted money. While speaking at a Moneylife Foundation seminar, Pranay Vakil, a respected name in the real estate industry and former chairman of Knight Frank India had said, there is no regulation in place to deal with the menace of unaccounted money.
 
 
There are some short term and some long-term effects of the Bill on real estate. For the short term, the additional requirement of registration with Regulator may delay new launches. Similarly, the requirement of launching the project only after receiving all approvals may lead to delayed sales and hence delay in cash flow in the short term for the developer.
 
It remains to be seen as to how soon the regulator comes up, what kind of costs it imposes on the system, and how extensive is its coverage and how it handles grievances. Following the approval from the Cabinet, the Real Estate Regulatory Bill will be tabled in the Parliament for making it an Act.
 

User

COMMENTS

Vishal Modi

2 years ago

Isn't unaccounted money a concern of the tax authorities? Don't our tax authorities maintain that as long as tax is paid on such money, they don't care about the colour of money.

In that case, why should the entire real estate industry get a "bad" name and suffer for weak governance? Sadly, it seems to be enemy no 1 for most people, including some respected professionals.

REPLY

vishal

In Reply to Vishal Modi 2 years ago

In most cases the public are also at fault. They look for properties with loopholes to benefit them self that result in huge corruption. We have seen this in a building under construction in Chennai and more than 60 persons losing their life.

MUDRA Bank: Confusions galore
MUDRA’s listed role and functions carry with them a lot of ambiguity and confusion. Is even the Reserve Bank of India clear as to what role MUDRA would play?
 
The launch of Micro Units Development and Refinance Agency (MUDRA) Bank by Prime Minister Narendra Modi before he left for Canada, Germany and France on a nine-day tour is being seen as a landmark akin to ‘Garibi Hatao’ and Integrated Rural Development Programme (IRDP) of the forgotten decades. People say that name has a lot to do with institutions. The name and style of MUDRA has built into it an agency and a bank. It has in it, development and refinance as functions. 
 
What will be the rules of refinance? Same as that of National Bank for Agriculture and Rural Development (NABARD)? The failure of both NABARD and Small Industries Development Bank of India (SIDBI), which were opened with much more fanfare, have disappointed because the persons occupying key positions after the initial progressive Chairmen, were all from their parent institutions and their mindset did not change. 
 
Even today, a decision from NABARD moves like the wheels of the chariot of Lord Jagannatha of Puri. For example, the fund announced for promoting processing companies in 2014-15 languished till 31 March 2015 for want of putting in place the needed architecture. Same is the case with SIDBI, where the fund announced for micro and small enterprise (MSE) promotion and development hardly took off till the end of March 2015. 
 
NABARD has significant achievements on its report card like watershed management, self-help group (SHG)-bank linkage and dairy finance. It failed to strengthen the cooperatives and regional rural banks (RRBs), both as a refinance agency and supervisor. Similarly, SIDBI jumped into micro finance. It still has many unfulfilled expectations from the micro and small enterprises (MSEs), its principal mandate. Its IDBI culture made it move in favour of collateralised large volumes and prime lending institutions hardly saw it as leader in lending to the micro, small and medium enterprises (MSME) sector. Its Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises (CGTMSE) has little to claim. Now MUDRA Bank joins as one of its arms! 
 
Both NABARD and SIDBI are fully owned institutions of government of India. Bharatiya Mahila Bank (BMB) that joined the league a year ago, is yet to report its strength in fulfilling the objectives for which it is set up. Is it failure of management or governance or policy or regulation? Is there a guarantee in waiting for the MUDRA Bank to behave better? How?
 
Both NABARD and SIDBI have grown under the culture of ‘suspect and respect’ instead of ‘respect and suspect’ borrowers who belong to the neediest sections of the society. MUDRA Bank for the time being at least is an appendage to SIDBI. Mudra’s role as has been announced includes:
Policy formulation for financing micro enterprises, small business firms and registration of microfinance institutions (MFIs);
Rating and accreditation of MFIs;
Setting benchmarks for best practices of lending , client protection and customer service;
Providing technology support to cover the last mile entity;
Formulating and running a credit guarantee scheme for micro enterprises;
Setting up a good architecture for micro finance; and
Acting as a development and refinance institution.
 
The above listed role and functions carry with them a lot of ambiguity and confusion to say the least. Is it going to be an institution engaged in policy for funding the poor or be a regulatory institution for the MFIs? It will secure a capital of Rs20,000 crore from the union government as part of budgetary grant. It will also gets Rs3,000 crore to provide credit guarantee to the primary borrowers as a risk cover fund. 
 
The Finance Secretary, while responding to some queries on the set up and functions mentions that the Bill, a year hence, would define the umbilical cord between the MFIs (even the MFIs would be defined then) and MUDRA. I am not sure whether even the Reserve Bank of India (RBI) is clear as to what role MUDRA would play and what type of clientele it would embrace? Will it be a refinancing institution as the name indicates? 
 
Any financial institution should have built-in capabilities for cross-holding risks among various client groups. MUDRA does not exude confidence in this direction, as there would appear to be a concentration risk in operations and sovereign risk in funding and governance. These risks need resolution up front instead of later.
 
The loan products announced, Shishu, Kishore, Tarun are highly innovative and one would like to see the conditions and timelines attached for the sanction of loans. Will MUDRA sanction them? Or will it refinance them? If it is refinance, when the banks do not fall short of resources, why would they borrow from MUDRA and do on-lending to the retail borrowers? Glitter of products should not be allowed to fade away in acts of inefficiency.
 
The political desire to provide access to the informal sector is one thing and putting in place the right policies, processes and right persons to execute it is another.  Hope that the government would carefully ponder over the organisational structure, nature, role and functions and have informed discussions and wide stakeholder consultations sans the west-bound institutions like the Accenture or PWC. 
 
MUDRA should be an institution embedded in the culture of promoting equity and discipline the cardinal principles of lending for the poor. Like many, I also have lot of hope and a hope that should see its fulfilment.  
 
(Dr Yerram Raju Behara is a former senior executive of SBI and an economist and risk management specialist. The views expressed in the article are his personal.)
 

User

COMMENTS

Matyamad

10 months ago

The article doesn't specifies how NABARF and SIDBI failed and disappointed in development of MSMEs.

Satish Kalra

2 years ago

Dr Yerram Raju Behara has raised the right concerns at the right time. I think we should learn the lessons from the way NABARD & SIDBI has performed or not performed. NABARD has virtually become a Research Agency. SIDBI also is far from the desired objective of promoting the entrepreneur in the informal sector in Micro and Small Category. It is also difficult to break the inertia of Commercial Banks and generate in them the love for the informal sector.

REPLY

Bal krishna Gupta

In Reply to Satish Kalra 2 years ago

i AGREE.

Satish Kalra

2 years ago

I think the author has raised the right concerns at the right time. RBI and the GOI may like to examine. NABARD has become a University of Research Reports instead of making real contribution to being a Bank for Agricultural and Rural Development. SIDBI too has not contributed significantly to the Micro & Small Segment in the formal sector. If some readers need any data a casual perusal of the websites and reports of these institutions can make it clear.

Satish Kalra

2 years ago

I think the author has raised the right concerns at the right time. RBI and the GOI may like to examine. NABARD has become a University of Research Reports instead of making real contribution to being a Bank for Agricultural and Rural Development. SIDBI too has not contributed significantly to the Micro & Small Segment in the formal sector. If some readers need any data a casual perusal of the websites and reports of these institutions can make it clear.

Bal krishna Gupta

2 years ago

There is no point in designing new bottles for existing wines.
There are enough seekers : only the vendors, the usual suspects, the commercial banks,are missing in action.

The refinancing body, MUDRA, cannot by itself disburse the Micro loans.

As soon as it condescend to allow MFIs to lend to the Micro enterprises and refinance the MFIs in turn, the vicious circle would have started. The middlemen and in many cases the promotes of MFIs themselves would create Muster rolls of Farzi Borrowers and gulp the proceeds.

Bal krishna Gupta

2 years ago

There is no point in designing new bottles for existing wines.
There are enough seekers : only the vendors, the usual suspects, the commercial banks,are missing in action.

The refinancing body, MUDRA, cannot by itself disburse the Micro loans.

As soon as it condescend to allow MFIs to lend to the Micro enterprises and refinance the MFIs in turn, the vicious circle would have started. The middlemen and in many cases the promotes of MFIs themselves would create Muster rolls of Farzi Borrowers and gulp the proceeds.

Ramesh Ramaswamy

2 years ago

Very well articulated....

MG Warrier

2 years ago

One cannot deny that there remains enough ‘space’ for some more new institutions in the Indian Financial System. Problem arises, and that problem should not be seen lightly, when new institutions are floated when existing ones stray away from their responsibilities or government finds it expedient to entrust funds and responsibilities to a new organisation because the one which exists follows prudent norms, which, if applied to the clientele now targeted, will delay things. In addition to Mahila Bank of 2014 and MUDRA (Bank?) of 2015, RBI Governor is optimistic about a variety of small, medium and large banks opening shops during the next couple of years.
When SBI, UTI, IDBI, SIDBI, NABARD, RRBs and EXIM Bank were formed or structural or ownership changes were made in commercial banks and banks cooperative sector, there was close consultation between GOI and RBI which ensured smooth launching of institutions and introduction of changes. Mahila Bank and MUDRA are concepts which had fast=track launching. Regulatory and supervisory concerns and concerns of overlap of responsibilities should be addressed by GOI and RBI.

V. Jaganmohan

2 years ago

To convert MUDRA Bank into a potential game changer, Government should consider the following:
1) The Headquarters of the proposed MUDRA Bank should be located in any city which has less than one million population. Being in small city, it would be able to appreciate the requirements of small and micro businesses which are spread over thousands of villages and small towns. 2)It should recruit all young staff below age of 25 who have graduated in Commerce, Economics, Social Sciences or Rural Management. There should not be any deputation of staff from Commercial Banks, NABARD and SIDBI 3) 75% of staff recruited should have origins in small towns and villages of India. There should be minimum representation from Metro cities. 4) The Bank should adopt technology from the day one. 5) The Bank should also provide some refinance, apart from MFIs, to RRBs, Small Finance Banks and State Cooperative Banks for reaching last mile connectivity to small borrowers in non-formal sector. 6) The shortfall of targets in Commercial Banks with regard to lending to MSMES should be invested in MUDRA Bank on the lines of RIDF window of NABARD so that MUDRA would get cheap resources. 7) Govt. of India should place annual progress report on the performance of MUDRA Bank to Parliament to assess the impact being made by the Bank in reaching the unfunded.

Ajeesh Balu

2 years ago

How can one blatantly say that NABARD and SIDBI were failures? Compare various statistics- Incremental Food grain production during decades after independence and till now- Credit flow in rural areas- Self Help Groups that flourishes in the country- people who have come out of poverty. They might not have lived up to every expectations, but surely they have made a difference.

Further, the food processing fund was allocated to NABARD in October 2014 only and it could come up with the guidelines, get proposals and sanction projects worth 215 Cr. One should not forget that NABARD has consistently achieved the targets set to it by union government.

The job of an academician or a stray commenter is easy. The statements must be accompanied with real facts. As far as MUDRA bank is concerned, it will act as a refinancing agency. The author has pointed out that 'when the banks do not fall short of resources, why would they borrow from MUDRA'. The simple reason is if the banks were really into micro credit there would not be any need for MUDRA. But as we know the banks are hesitant towards micro finance sector. Refinance from MURDRA would provide them more funds(@low interest rates) to play around with even if they are flushed with funds. Hope MUDRA would realign the MFI sector with the much deserved focus and attention it deserves.

REPLY

B. Yerram Raju

In Reply to Ajeesh Balu 2 years ago

No public sector bank ever failed to achieve a target and NABARD too!! The speed of execution and reach are important. Look at the annual reports of NABARD that vindicate my point: Cooperatives that had share of 62% in agriculture credit when NABARD was established has come down to 14% in 2014 and still down now. Remember I gave credit where it deserved - watershed management, dairy, shg-bank linkage. it has more earnings from the armchair lending of RIDF and treasury management.
My comments are not from an academic economist comments - they are borne of the concern for the emergence of organisations with proper policies and culture up front. Anxiety to jump into bandwagon should not obfuscate the purpose and raison de etre for emergence for new institutions.

Charu Dutt Sharma

2 years ago

Very well written point Dr. Y. Raju. Headline should be Mudra Bank : Way Forward. In my view its right step in right direction. Only concern which you have pointed very well, is execution with right intent.

S K Agarwal

2 years ago

Most commercial banks in all practical approach at the small branch level shun financing upcoming entrepreneurs without proper security. Even they ask some security for financing under Govt schemes as they fear loss of money despite the fact that subsidy is received from Govt.

MUDRA will wipe out this fear and every small and very small entrepreneur willing to work, will get financial assistance.

Vasant Godse

2 years ago

Writers in Money life know everything about everything. Do we not give some time for an evolving concept? Theoretically time is needed for a system even to fail!Shall we that generous?

Vasant

Vasant Godse

2 years ago

Writers in Money life know everything about everything. Do we not give some time for an evolving concept? Theoretically time is needed for a system even to fail!Shall we that generous?

Vasant

Gopalakrishnan T V

2 years ago

No doubt good Institutions are real strengths for any economy to grow fast, but they cannot remain parasites and turn out to be white elephants in the long run. NABARD and SIDBI were set up with lot of fanfare but a seriuos introspection would reveal that they have not played their role effectively and both agriculture and small Industries have suffered over a period cannot be ignored. NABARD could have done wonders by playing the role of a coordinating agency bringing in the necessary infrastructure to give a boost to agricuture and rural development.Agricultural sector suffers for want of adequate and timely finance, lack of adequate infrastructure like roads, stoarge, transportation , marketuing and exploitation my politicians and middlemen in all possible ways one can imagine. If NABARD had been proactive, agricultural greowth and its share in GDP would not have registered such a steep fall and shamed the nation which is predominantly an agricultural one.The farmers even today suffer for want of irrigation, insurance, timely finance, infrastructure etc which NABARD could have easily taken care of with proper coordination with states agricultural departments, Insurance Companies, marketing and distribution agencies with proper storage facilities and cheap transportation facilities. Instead they concentrated on refinancing ignoring the presnce of Cooperatives, RRBs and other agencies involved in rural development. The fact remains that after creation of NABARD, agriculture and Rural segment has suffered cannot be challneged.Similar is the case with SIDBI. Small Scale sector which is the provider of maximum employment opportunities and which can give a boost to our exports have not been given the required support to grow with all potential it had. Institutions are there to identify the gaps in infrastruture, the potential for growth and provide the required support in terms of finance, professional management for enhanced, productivity with quality and export etc.Hope MUDRA Bank will learn its lessons from the failures of NABARD and SIDBI and will emerge as a unique set up to set up and support new and old micro units. The author has expressed his concern from past experience and seeing perhaps the poor performance of agriculture, Small scale units and micro units with all institutional presence exclusively set up for giving a phillip to the rural segemnt.

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)