Swamy VS Rajan

BJP Leaders Mr. Subramanium Swami says ,

“In my opinion, RBI Governor is not appropriate for the country. I don’t want to speak much about him. He has hiked interest rates in the garb of controlling inflation that has damaged the country,”
He further says ,“The sooner he is sent back to Chicago, the better it would be.”

Mr. Rajan is the on-leave Professor of Finance at the University of Chicago’s Booth School of Business.

Swamy said the Governor should have known the "inevitable consequence of rising and high interest rate and his policy was wilful and thus anti-national in intent".

Rajan, the BJP leader also claimed, has been sending confidential and sensitive financial information using unsecured Chicago University email id and publicly disparaging the BJP government.

Swamy said that six allegations levelled by him against RBI governor were "prima facie true" and require termination of Rajan's services "immediately" in the "national interest".

In his second letter to Modi within a fortnight, Swamy alleged that despite holding a sensitive and very high government post, Rajan has been making mandatory trips to the US to renew his Green Card.

My Opinion are as follows:

Action of Subramanium Swami criticising RBI Governor Mr. Raghuram Rajan is not at all good and need to be condemned by all. He should not use such derogatory word for a person who not only  holds prestigious post of the country but also has earned name and fame in world economic forums. 

Mr. Rajan holds one of top and prestigious post of the country. My Common sense says that none of government staff should be criticised in the manner in which Mr. Rajan has been criticised by Mr. Swamy.

Rajan is undoubtedly a talented and intelligent economist and fittest person  for the post of RBI Governor and he deserves to be awarded with second inning. However,if there is difference of opinion , ministers and expert officials should sit together , discuss and resolve i the issue in larger interest of the country . Politicians have to move above politics and take care of economics of the country . Economy cannot grow well by demoralising administrtive and executive workforce.

Swamy has to learn to respect image of others, officers as well as politicians . It is totally unjustified to malign any officer's image without justifying the same on proper platform and without giving an opotunity to accused to defend. After all there is a well defined procedure to prove guilt of anyone, if any,   and no one has the right to publicly humiliate any officer or any employee in public . This habit of open criticism will have bad impact on entire work force. And any political leader , whosover he or she may be , cannot be allowed to take law into his hand and act arbitrarily . Whims of any politicians cannot overrule existing laws and practices.

Public Statement  by politicians against top dignitories of the government or about any official cannot be considered good from any angle of consideration.

 I hope Prime Minister Mr. Narendra Modi will stop Swami like politicians in interfering in such sensitive matters.  Rivalry among executives , leaders of political parties and judicial heads will prove deterimental to the country.

Politicisation of executive post is not good for the health of the government and it undoubtdly adversely affects quality of governance and it leads to culture of flattery and bribery only.

However if there is any proof of ill-motive and bad intention of Mr. Rajan behind any of his action, Mr. Swami may appraoch appropriate authority or write a confidential letter to President of India for appropriate action.

There is no doubt that only officers who are apt in flattery and bribery will tolerate such humiliating statements as made by Mr. Swami. An officer with dignity will not like to remain in post such as RBI Governor if bad words are used against him. Country will suffer  if politiicans make mockery of officers and their  image for political gain. 

Country will grow only when officers are honest and devoted to their duty and when such officers get due respect and recognition..

 I have no hesitation in saying that UPA government lost trust of people of India only because it promoted culture of flattery and bribery in politics, in administration and in judiciary too . Officers who were ready to become  yesman of leaders of Congress Party got awarded during UPA regime at the cost of officers who used to serve devotedly and who were loyal to their post .Country had to suffer huge losses in various scam only due to bad culture promoted by Congress Party during their six decade rule.

I hope Mr. Modi will take proper care and will not allow their Ministers and party men to make unwarranted statement against any official which demoralises entire service class people. Let executive and judiciary work independently and without fear of repercussion from the side of ruling party until they violate laws and breach limits of tolerance in a civic society. Politicians must be subjected to certain norms of discipline and restraints as officials are supposed to follow.

So far as cut in interest rate is concerned, there is difference of opinion on whether it will help in increasing GDP growth in a country like India or not. In my opinion lowering of interest rate any further will badly impact savings and investment. Banks will face severest liquidity problems if interest rates are allowed or forced to come down . 

I rather feel that interest rate on deposits should go up to some extent , at least upto 10 percent to motivate savings and investment. In an effort to give comfort to loan seekers , government cannot give discomfort to lacs and crores of depositors who keep their hard earned savings in banks for at least keeping its value intact or for increasing its purchase value . And if there is no growth in deposits,banks cannot grow in credits.

I like to make it clear here that manufacturing or trading activity may not grow only by lowering of interest rate. In seventies and eighties , interest rate used to prevail much above prevalent current rate structure. GDP growth during that period was not less than what it is today.   

Moreover, Cut in Repo rate do not give much relief to banks and hence they cannot reduce lending rate in the same proportion in which RBI cut Repo rate.

Lending rate called as MCLR is depndent on many factors like average deposit rates, repo rate, CRR loss , tenor of loan, administrative and establishment cost , profit margin etc. Obviously repo rate is one negligible factor only among many factors which affects lending rate structure.

 And if Swamy feels that RBI should cut Repo Rate further and lending bank should also cut all rates, he should guarantee and explain how he will advise banks and savers to cope with decreasing deposit growth, increasing liquidity problem, increasing pain of savers whose livelihood depends on interest income. Not only this , he should also guarantee that there will be credit growth and GDP growth only by cut in repo rate.

I further say that if Mr. Swami is much concerned about the economy, he should sit with all experts in economics, with vetern bankers and politicians and with RBI officials to frame a uniform interest rate structure of deposits and for lending keeping in view priorities of the country. They should identify which secotors are saturated and which need intensitve investment and accordingly lending rate may be fixed for all banks, private as well as PSU banks. It will also remove unhealthy competition among bankers to attract clients . 

28 PSU banks are organs of same government but there is cut throat competition to give favour to high value customers. Eventually loss to any bank out of 28 banks will be a loss to India and loss to taxpayers only. If any of 28 banks suffer loss, the burden will shift to common men only.

I therefore make an appeal to Mr. Swamy not to make politics on post of RBI Governor . I hope he will exhibit maturity in politics and do not act in haste to remove Mr. Rajan . Swami should not behave like Kejriwal , otherwise he will lose his image which he has earned due to his principled stand against corruption. Swami has already faced huge criticism from all corners and earned bad name by dint of his attack on Rajan. He should control further damage by stopping his plan of character assasination of Mr. Rajan

Neither do I suggest to give second term to Mr. Rajan if there are any valid reasons for removal of Mr. Rajan  from his post. I simply insist that proper procedure should be followed to punish any officer , not only Mr. Rajan . He should present all substantial facts available to him against Mr. Rajan and allow legal scrutiny before juding him.  Mr. Swami should shed his personal ego and keep country above all party politics or self interest.

Subramanian Swamy steps up attack on Raghuram Rajan, lists 6 'charges' against RBI Governor in letter to PM-Zee News- 26.05.2016

BJP's Rajya Sabha MP Subramanian Swamy on Thursday stepped up his attack on RBI Governor Raghuram Rajan levelling six serious charges against him and asked Prime Minister Narendra Modi to immediately terminate his services.

This is the second time in two weeks that Dr Swami has written to Prime Minister Modi seeking immediate removal of Rajan.

In the first letter, written on May 17 , Swami had called Rajan 'mentally not fully Indian' In his second letter, Swami once again accused Rajan of raising interest rate to the detriment of small and medium industries

Rajan unfit to be RBI Governor: Swamy-The Hindu-12 th May 2016

BJP leader Subramanian Swamy on Thursday suggested that Reserve Bank Governor Raghuram Rajan be removed from the post as he was responsible for “unemployment and collapse” of industrial activity.

“In my opinion, RBI Governor is not appropriate for the country. I don’t want to speak much about him. He has hiked interest rates in the garb of controlling inflation that has damaged the country,” he told reporters in Parliament House.

The Governor’s actions have “led to collapse of industry and rise of unemployment in the economy”, he said. “The sooner he is sent back to Chicago, the better it would be.”

Mr. Rajan is the on-leave Professor of Finance at the University of Chicago’s Booth School of Business.

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After assuming charge as RBI governor in September 2013, Mr. Rajan gradually raised the short-term lending rate from 7.25 per cent to 8 per cent and had retained the high rates throughout 2014.

He kept the rates high, citing inflationary concerns despite intense pressure from the Finance Ministry and the industry for softening them with a view to boosting growth.

The Governor began the process of lowering the rates in January 2015 and since then it has come down by 1.50 per cent to 6.50 per cent

Merger of SBI associate banks to cost Rs 3,000 cr: Bhattacharya-Business Standard 27th May 2016

However, benefits from merger including Bharatiya Mahila Bank will outweigh costs

The proposed merger of State Bank of India (SBI) with its five associate banks and the Bharatiya Mahila Bank (BMB) will cost it around Rs 3,000 crore, said SBI chairman Arundhati Bhattacharya, while announcing the bank’s fourth-quarter results here on Friday.

However, the benefits from the merger will outweigh the costs, she added. “We have sought the government’s permission to begin negotiations. We hope the permission will be forthcoming... We have tried to assess what a merged entity would look like, and I can assure you that there will not be any impact either on capital or NPA (non-performing asset) position, and we are well positioned for the merger.”

The five associate banks of SBI are State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

Much of the cost of the merger will accrue from the provident fund liabilities of employees. “On account of provident fund, the maximum amount we are anticipating is Rs 3,000 crore,” she said.

http://www.business-standard.com/article/companies/merger-of-sbi-associate-banks-to-cost-rs-3000-cr-bhattacharya-116052701193_1.html

What I commented in last few days

But the fact is that no improvement has actually taken place  at ground level during last three decades  in culture of lending , in position of recovery and in habit of negligence in monitoring in PSU banks. Situation has rather been deteriorating year after after. Top ranked Officers who are clever in manipulating balance sheet come out with shining balance sheet and get elevation through their mentor Ministers and RBI officials. But sooner or the later, in some quarter or the other , each bank has to book bad results and make false promises that they will deal with problems and try to reduce stressed assets in forthcoming quarters.
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In fact ,Officials are in general busy in falsely glorifying their bosses. A Branch Manager glorifies a Regional Head,  RH glorify  Zonal Head , General Managers glorify ED and CMD and finally CMDs are busy in glorifying Finance Ministers and RBI officials. Most of them are fittest Yesman than real performers. They are good speakers to hypnotise ministers and bank staff both. They are more loyal to their sources of wealth and power than to their bank.