Money & Banking
Subramanian Swamy’s 6-point ‘chargesheet’ seeks Raghuram Rajan’s ‘termination'
BJP MP Subramanian Swamy, who has the Reserve Bank of India (RBI) governor in his crosshairs, has fired off a six-point 'charge sheet’ to the Prime Minister seeking Dr Rajan’s ‘termination’ even before his term ends. This letter is a follow up to his earlier one which insisted that Dr Rajan’s term should not be given another term as governor.  The issue of Dr Rajan’s second term has attracted unprecedented media attention, with Amul, a government-run milk cooperative also jumping into the fray with pitch for another term. 
 
Here is what Dr Swamy has alleged: 
(a) Dr Rajan raised interest rates at a crucial stage leading to recession in small and medium industries which led to massive unemployment of semi-skilled labour. For a labour intensive economy like India, rising unemployment is as wilful and anti-national as rising inflation and it shows RBI policy to have been insensitive
 
(b) Dr Rajan insisted on permitting Sharia compliant financial institutions to be set up. The Prime Minister however, intervened and ordered a stay on 1 December 2014.
 
(c) Dr Rajan has continued to hold on to his US Green Card which is essentially a transitional visa arrangement for acquiring US citizenship. While holding office as RBI Governor, he has been continued annually to renew his Green Card by making the mandatory trip for at least one day residence in USA. More patriotism is required from a senior Government policy-maker in India like Dr Rajan!
 
(d) As a senior man in the Indian government, he has not restricted himself to correspondence with his office email address. He has an unsecure personal email address raghuram.rajan@chicagobooth.edu from University of Chicago. Using this address he has sent confidential and sensitive financial information to friends and associates around the world in reckless disregard of his official duties as RBI Governor.
 
(e) Despite being a government official, he has been publicly disparaging of the BJP government. Is he frustrated? Does he have a grievance in spite of holding high office? He has been involved in pejorative sarcasm instead of being part of the accountability required of senior men.
 
(f) Dr Rajan is a member of the US dominated Group of 30 (www.group30.org ) which is known to defend the US’ dominant position in the global economy. It has been observed that Dr Rajan while taking policy decisions has been involved in a sell-out to the foreigners, in particular, to the US. While no pecuniary gain has been made by Dr Rajan for such policy swinging, it reflects a clear lack of patriotism and confidence in India as a growing economy.
 
At a time when the debate is about a second term for the RBI Governors, Dr Swamy ends the letter by saying that it is in India’s national interest to “terminate the tenure of Dr Rajan”.

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COMMENTS

MG Warrier

1 year ago

This is a great idea. Let us wish Dr Swamy happiness in his endeavours. I remember Dr Swamy suggesting sometime back that 'Dr Rajan should be sent back' and Dr Vaidyanathan(a familiar face for Moneylife readers) should be made RBI Governor. Lord Clive was answering to a loger charge sheet back in England. At some stage, he wondered, "After listening to the 'opportunities' , I find even the charges are too insignificant"
Remembered, when I tried to connect Dr Rajan's contribution to India's financial sector and economic development after he came back to India and the six charges 'framed' by the Hon. RS MP. I maintain, GOI has been acting, by and large, with mturity in matters like this.

REPLY

Ramesh B Mhadlekar

In Reply to MG Warrier 1 year ago

I have sent to Swamyji the documents received under RTI proving recruitment Scam under the Regime off Raghuram Rajan

MG Warrier

In Reply to Ramesh B Mhadlekar 1 year ago

Thanks...May be it may help Swamyji. His 6-Point CS was weak!

Ramesh B Mhadlekar

In Reply to MG Warrier 1 year ago

Yes also Raghuram Rajan is abusing his power while allowing his wife or spouse and children to use the red beacon official car meant exclusively for him.

Suketu Shah

In Reply to Ramesh B Mhadlekar 1 year ago

Great work done by you.Dishonest people in India always true to prove(in vain) that honest people are dishonest.Well done!Keep it up.

Ramesh B Mhadlekar

In Reply to Suketu Shah 1 year ago

Wife of Dr. Raghuramrajan is abusing the RED Beacon official Car meant for the Governor by using the same for her personal use.

Kingshuk samanta

1 year ago

subramanyam swamy is not a honest man.his past records are dubious.rajan is one of the best rbi governor we indians ever had

REPLY

Ramesh B Mhadlekar

In Reply to Kingshuk samanta 1 year ago

Is Mr. Raghuram Honest? He is involved in Recruitment Scam in RBI and the same is proved by RTI documents.

Srinivasan Subramanian

1 year ago

After planting cronies in Central universities, CBI, Bank Boards, dangerous plan to invade RBI by removing Governor Rajan.All to help donor Corporates with lower interest

REPLY

Nataraj S K

In Reply to Srinivasan Subramanian 1 year ago

So that one more RSS Loyalist can be brought into this Premier Institution.

Suketu Shah

1 year ago

1)Check Dr Swamy's track record.Whatever he has stated in the past has turned out to be correct.

2)Also why are congress supporters creating the impression that only Rajan can be RBI governor and no one else?Clearly Rajan is working against the interest of the country and his bosses are worried once he goes the new RBI governor appointed by NaMo wl turn the economy on its head in 2 yrs.

Anand Vaidya

1 year ago

I think Swamy is usually ahead of the curve... and always right. I will support Swamy's stand on Rajan.

SuchindranathAiyerS

1 year ago

Quite independently here is what I has to say a few weeks ago:

1) Rajan is Anti-India.He joined Obama's tolerance chorus like any Body Shopping Magnate or other PANGOLIN* Notable, Awardee or other Camp Follower. This is unacceptable in a Governor of the Reserve Bank of India. In doing so he has abused Indian hospitality like a worthless Black Yank or Italian Bar Maid,

2) Instead of doing Central Banking, which should be felt not seen, he is seen and not felt. For example instead of watching M2 (Money supply), he is conducting public classes in Dosa Economics to distract the already diseducated public from the menace of inflation.

3) Instead of auditing Banks and Banks' lending norms and methods, he is raising political canards against individual borrowers like a politician or a PANGOLIN journalist.
In brief, Rajan seems more of a Bollywood Khan, a Tendulkar Group Captain or a Nehruvian Romila Ashokan than a Central Banker. India already has too many of these.

And what I had to say several months ago:

Raghu Ram Rajan should remember that he is a Central Banker and neither a politician nor a Nehru-Gandhi "Economist". Central Bankers should not be heard but be felt in the value of the rupee, the fiscal discipline of the Government and the integrity of the Banking system. Instead of taking time off from his work to lecture on inflation and dosas or wag a "tolerance" finger at the Prime Minister as part of the Obama-Sonia "parivar-that-loots-together-to-stay-together" chorus of Fifth Columnists, he should study M. H. De Kock, R. S. Sayers, Beckart, Altman's "Z", Tamari's Index of Risk etc. and learn to measure up to his job. Unless, of course, he is as erudition, integrity, culture and arithmetic challenged as India's Indian educated Judiciary, Bureaucracy, Police, Professors and others appointed and promoted on the basis of birth and Tehsildar's certificates. His instruments are OMO, BR, Audit, fines, and capping government over drafts. Not his mouth.

*Note: PANGOLIN: An enemy of India who believes in inequality under law, exceptions to the rule of law and persecution of some for the benefit of others. At present, the sole purpose of the Indian Republic, Constitutional or otherwise, is to pamper and provide for certain constitutionally preferred sections of society who the British found useful to hold and exploit India at the cost of those who the British hated and persecuted. The Pangolin is a creature that is unique to India and feeds on ants that are known in nature to be industrious and hard working if not quite as fruitful as bees who flee to better climes. (PANGOLIN is an acronym for the Periyar-Ambedkar-Nehru-Gandhi-Other (alien) Religions-Communist Consensus that usurped the British Mantle and has worn it with elan to loot, plunder, and rape India since 1921 and re write History and laws to their exclusive benefit since 1947)

PPM

1 year ago

I am not Swamy supporter and what he is telling now is correct. Raghuram rajan is an Economic Hit Man (EHM) and he is working against the interests of India. He should be removed immediately from the position of RBI governor.

Ramesh B Mhadlekar

1 year ago

Swamiji you can include the 7 th charge of Mr Rajan being involved indirectly as head of RBI in recruitment scam of class IV employees which is contrary to Art 14 and 16 of the Indian constitution and also the SC decisions in the matter of Public employment.

REPLY

Ramesh B Mhadlekar

In Reply to Ramesh B Mhadlekar 1 year ago

In similar recruitment Scams IOB officers and union leaders have gone to Jail and also chauthals are living example, but RBI officials are roaming scot free. It appears laws are applied according to persons and their face value in India. I have RTI's to prove the recruitment scams of RBI.
\

Nataraj S K

1 year ago

I would request readers to read Anuvab Pai's piece,on Page 12 of today's ET, "STAY ye chosen one"-- is a superb one Re butting Swamy's rambling nonsense. The end line of the article is very aptly superb,and I recommend readers to savour the" sweet,buttery " ending note.

Nataraj S K

1 year ago

I would advise Dr. Swamy to return to the U.S.A., to resume his teaching assignment, which he gave up many years back. He needs to brush up on what changes the world's economy's been through since the time he left. It will surely serve him well,and do the country a lot of good.

REPLY

B. Yerram Raju

In Reply to Nataraj S K 1 year ago

Who will take him as economics professor at Harvard unless it has decided to teach nonsense through Swamy? Swamy is after all living at the munificence of the ruling party by sitting in Rajya Sabha. How can he represent the voice of entire India and call a person guarding the economy as gatekeeper of the Indian Financial System? If he has accepted rewards so were many in the past from several Universities. Holding a university email address as an alumni is not bad. How can Swamy say that the mails sent through this mail address carried information against the interests of India and Indian economy unless he has hacked them? Reading other's emails sent on personal count is a crime. Swamy has no ethical ground to question Rajan. He has done commendable job during his tenure and in spite of fiscal profligacy and changed GDP accounting, he kept the economy hold its head high. His comments are against exuberance and complacency of the powers that be.

Ramesh B Mhadlekar

In Reply to Nataraj S K 1 year ago

You are supporting a man who does not believe in Constitution of India or SC decisions, he has no place in India and his supporters should go along with him from India. He is involved in Class IV recruitment scam ion RBI.RBI is not a private shop where any Tom and Dick and Harry can absorb near and dear ones of Union leaders.

SAMUEL WARBAH

1 year ago

Even Jim Rogers wish that Dr.Rajan was Chairman of the Federal Reserve. So much about the respect that people have on Dr.Rajan.

Nilesh KAMERKAR

1 year ago

Not even a single person has been able to prove Dr Swamy wrong. Why?

REPLY

Ramesh B Mhadlekar

In Reply to Nilesh KAMERKAR 1 year ago

He is absolutely right, the earlier he is sacked it is better for India.

Ramesh B Mhadlekar

In Reply to Ramesh B Mhadlekar 1 year ago

Dr. R Rajan is a liability to India, he pretends to be well wisher of Indian economy but he is not.

‘Fair practices code adopted by banks is observed more in breach than in practice’ over a year after it was issued
Well over a year after the Reserve bank of India (RBI) notified the Charter of consumer services, very little has changed. The code remains toothless, yet the RBI only talks about its issuance, nearly a year and half after it was formally announced. 
 
 “Very often, RBI has found that the fair practices code adopted by banks / financial institutions is observed more in breach than in practice. In view of the growing complexities of the financial transactions and financial markets, RBI, therefore, felt a need to clearly define the role and responsibility of financial services providers, especially in relation to consumer protection and the framing of the Charter of Customer Rights was a logical step in that direction”, said SS Mundra, RBI Deputy Governor, while addressing a gathering at the Banking Codes and Standards Board of India (BCSBI) this week.
 
He addressed another overdue issue, when he said, "RBI is already examining whether to issue regulatory direction with regard to limiting the liability of customers on fraudulent transactions arising out of frauds and electronic banking transactions". He admitted that with the increase in online transactions, there has been a rise in complaints related to electronic banking transactions, unauthorised fund transfers, fraudulent withdrawals from ATMs using duplicate cards and phishing e-mails, among others.  "It is imperative to have a robust mechanism to prevent incidents of frauds in mobile Net banking and the electronic fund transfer so as to retain customers' confidence in these delivery channels," he said. 
 
At the same time, raising customer awareness for safe usage of these channels should be an important item on the agenda of the banks, he said. "... if customers don't get confidence in the channels and decide to abstain from them, then it can have only two outcome - either customer would migrate or customer would come back to the traditional channel which would mean higher operating cost for the banking system," he argued.
 
Mundra criticised the banks for totally ignoring or rather knowingly violating the 'Right to Suitability' enshrined in the RBI's Charter of Customer Rights in an attempt to mis-sell products to customers. Under the Rights to Suitability Charter, the products offered by the banks should be appropriate to the needs of the customer and based on an assessment of their financial circumstances and understanding. "RBI is seized of this issue and may take a strict action, including heavy penalties, if the banking industry continues to follow such unethical and unaccepted practices of mis-selling of third-party products," Mundra warned. He advised banks to put in place a system of periodic inspections of the sale of third-party products by either own staffs or by direct selling agents (DSAs).
 
The RBI is also planning to augment the number of its banking ombudsmen offices in the near future, Mundra said.
 
In conclusion, Mundra said that as the competition intensifies with the licensing of more new banks, only those entities which provide better customer service and experience would survive. Various research studies have shown that customers are willing to pay for quality service and would transact with the institutions which provide better services. Some of us might have heard that customers choose to move to another bank in case if he/she was dissatisfied with the services received at the present. With the implementation of a unified KYC (Know Your Customer), account number portability, would come into the realms of possibility. With the introduction of unified payments interface, a customer can be identified with his unique “virtual address” mapped to his mobile phone linked to the bank account number. With this information available centrally at the NPCI, the portability of the account would merely need a change in linkage to an account in another bank at the backend. Banks must, therefore, build structure and processes that aim at providing quality and efficient services or else face the prospects of a customer silently walking away without causing any inconvenience to him/ her and loss of business to the bank. This is the warning to all banks and bank staff, as customers have begun to value service from banks.
 

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COMMENTS

Jagdish Manghnani

1 year ago

Very good if implemented in the right sprit

Need for tweaking laws and rules for preventing NPAs in MSMEs
The micro, small and medium enterprises (MSMEs) are the largest vendors for the Union and State governments in defence, aeronautics, electronics, safe drinking water equipment and services, medical and pharmaceuticals, solar equipment and servicing. The MSME Development Act (MSMED) also provided for MSME Facilitation Council, a quasi-judiciary institution serving as an arbitration and conciliation mechanism for disputes relating to the delayed payments for the goods supplied or services rendered by the supplier at little cost. Jurisdiction is restricted to units functioning within the State, although their dues can be with any undertaking or government outside the State. 
 
Only 10 out of 29 States have such councils functioning with the most efficient among them in Tamil Nadu, Karnataka, Telangana, and Kerala. Gujarat and Uttar Pradesh (UP), although have a large number of sick MSMEs, but have not reported the number of cases resolved through the Council. Neither the Ministry website nor the Development Commissioner for MSME (DC-MSME) has put out information on the functioning of the Council in various States.  
 
Section 18 of the MSMED Act does not cover the intending buyer’s places from where the order is placed for certain goods and the enterprise manufactures, according to specifications. For its own reasons the vendee can cancel the order. The SME suffers the loss until it finds a buyer requiring goods of the same specifications. It is unlikely the alternate buyer may be available as well. 
 
The units requiring facilitation for recovery of their bills against goods and services supplied represent their cases both by themselves and/ or through their advocates. The Council chaired by the Commissioner of Industries has on board representatives from the accredited Industry associations and State Level Bankers' Committee (SLBC). 
 
This alternate dispute resolution mechanism however, works well when the dues are with public sector units (PSUs) or buyers other than government agencies and the government itself. Government departments rarely honour the arbitration proceedings and that leaves many MSMEs as non-performing assets (NPAs).
 
The Courts also do not entertain appeals against the decision of the Council unless 75% of the disputed amount is paid into the Court. If the MSME unit were to approach Debt Recovery Tribunal (DRT), it has to up-front remit 25% of the claim amount without being sure of a decision in its favour, as the DRT is meant mainly to ensure that the banks do not suffer from bad debts. 
 
On the other hand, units that approach the Council have to deposit admission fees of just Rs500 and small administrative fees for arbitration as decided by the respective state government.
 
The advantage of approaching this Council is the specific timeline for settlement of the cases. Here every claim gets acknowledged on the same day with the respondent getting a notice to respond within 15 days. Most cases get settled within three months. The units get breathing time from banks to pay dues following the Award of the Council.
 
However, several public–private partnerships (PPPs) involving specific commitments from the government, when not honoured by the government, the SME units end up in huge losses. For example, SMAAT India Pvt Ltd, SME unit in Hyderabad receiving 158 national and international innovation awards installed water purification plants in Karnataka through PPP with government having to supply raw water and electricity after installation. About 240 plants installed three years back were not supplied raw water and power that denied them the user charges. Government of Karnataka did not even pay for the equipment and installation charges within a week of installation as required under PPP. The amount of loss is a whopping Rs220 crore. 
 
The losses arising on both the counts however, land up in terminal NPA status of the related units in Banks’ books. The Bank feels that the unit has sovereign risk domestically. The provisions of the MSMED Act need refinement. Several units have become victims of prejudice of either of the Branch Manager or the Controlling Authority. The units do not have the option to swap their collateralised account with another bank willing to take the account on merits, either at incipient stage or at NPA stage without impacting on their provisions relating to that account. 
 
RBI rules are no reprieve
The latest circular instructions of the Reserve Bank of India (RBI) only compound the problems and defy solutions to the actual problems faced by the units eligible for capital restructuring or revival but denied that opportunity. Instances of prejudicial view of some of the well-run MSME units by the managers concerned also contributed to the NPAs in the sector. 
 
Some alternatives that deserve a look, as the roll out of instructions in RBI circular 338 dated 17 March 2016 take effect from 1st June.
 
Swapping the Account: 
 
a) If any unit is aggrieved with a particular bank over the management of the loan accounts or over the inadequate limits sanctioned confining to the discretionary powers of the sanctioning authority, such unit having adequate collateral security should be enabled to migrate to another willing Bank either on as-is-where-is basis or for enhanced limits.
 
b) In respect of units where decision to restructure has been taken with a set of conditions, such conditions should be within certain rational boundaries – in terms of additional margin money or equity or additional collateral security or all the three simultaneously. If such conditions are too onerous they should be subject to redress by the Banking Ombudsman. It may be necessary to enlarge the scope of working of the Banking Ombudsman for this purpose.
 
No additional costs for migration shall be imposed on the units in such cases.
 
Zonal Committees: There is thus far no trace of the banks acting on the constitution of these committees although even the MSME Ministry circular dated 2 June 2015.  Bank-wise Zonal Committees also seem to pose difficulties in as much as each such committee has to have a specialist, a nominee of the government, representative of the financing bank from zonal or head office to be the convenor with the ZM as chairperson. A calibrated solution needs to be put in place.
 
a) Restructuring or revival as suggested by the TEV study should also be made mandatory if the CAP fails. If the TEV study were to opine that it is not economically feasible to revive the unit there would be no option but to reject the proposal and such rejection should invariably be recommended to the appropriate authority by the Zonal Committee.
 
b) The Committee should not otherwise have the option to reject the proposition of any running unit. Once rejected by the Zonal Committee, the unit’s option to revive ceases permanently.
 
c) If the proposal does not merit consideration due to malfeasance or fraud, legal proceedings could be instituted as mentioned in the circular and such disqualification should be recorded and communicated in writing to the unit with copy to the government so that the government can also take appropriate call on the statutory dues. 
 
d) Extant instructions specify closing the door for rehabilitation permanently if a fraud or malfeasance is noticed. This instruction is absolutely in order for all proprietary units. The instruction needs a review where one of the partners or directors indulges in fraud and even the unit is itself a victim of such action. Just because frauds are occurring in a bank, the bank is not dubbed as a fraudulent bank. As long as the unit changes the partner or director who indulges in such fraudulent act and institutes legal action, if the existing collateral securities sans those of the fraudulent partner or director, the reconstituted unit should be allowed to continue its manufacturing activity. 
 
 
Incentivising Banks: Banks should be incentivised for taking up restructuring. In as much as such action is taken up on well validated proposals that have reasonable scope for moving away from NPAs the period of transition should be viewed for lesser provisioning by the Banks concerned. 
 
Uniform treatment for all accounts between Rs10 lakh and Rs25 crore may not be in order for the following reasons:
a) Up to Rs1 crore Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) cover is available.
b) The bandwidth between Rs10 lakh and Rs25 crore is too large as the sanctioning authorities for the intermediary layers of limits will be different and so would be for taking a decision on restructuring/revival. By bifurcating the limits between Rs1 crore -Rs5 crore; Rs5 crore-Rs10 crore and Rs10 crore-Rs25 crore, the zonal committees will be able to involve the appropriate sanctioning authorities as members depending on the cases under consideration. 
 
It is appropriate for the RBI to tweak the prudential norms to the advantage of the banks that take a positive action in ensuring that the units do not turn sick in the first place and in cases where they find it worthwhile to rehabilitate in the second place so that asset loss and job loss can be avoided.
 
(Dr Yerram Raju Behara is an economist and risk management specialist. At present, he is Adviser, MSME Facilitation Council at the Govt of Telangana. Views expressed in the article are his personal views.)

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