Few deny that Indian banking is currently at its vulnerable worst since the restructuring and recapitalisation that accompanied the financial reform was completed by the middle of the last decade. Voices from within both the Finance Ministry and the Reserve Bank of India (RBI) have been expressing concern and calling on banks to do more to hold down the share of non-performing loans in total advances and recover as much as possible of the loans that were in default.
This surprises some because “financial reform” was seen as having corrected many of the weaknesses that led to rising NPAs in the banking sector. Reform was based on the principle that pre-liberalisation India was characterised by “financial repression”, involving large-scale state control over financial prices and financial activity. Bank resources were pre-empted and directed to sectors considered “priority”. This, it was argued, not only capped the rates that bank could charge their customers, but also resulted in larger volumes of non-performing loans because of exposure to weak sectors like agriculture and the small scale sector. The casualty was healthy intermediation, with banks unable to direct resources to the best and highest-yielding projects. The result was low profitability and higher NPAs.
Thus, reform partly involved redefining what constituted priority lending (including in its ambit large, input-supplying firms and certain kinds of loans for personal housing, for example), as well as giving banks greater flexibility and autonomy in deciding what they did with the resources they mobilised. However, the share of credit required to be lent to sectors categorised as priority remained at 40 per cent of total advances.
This led up to the view that the reason why NPAs in the banking system have been on the rise in recent times is the pressure to stick with priority lending. Like a lot else of the “introspective reasoning” that underlies economic argumentation under liberalisation — which leads to wrong assertions such as that markets are efficient and allocate resources best and that deficient or inferior economic outcomes are the result of policy measures such as subsidies to the poor and priority sector lending — this is not based on evidence. That comes through from a number of features of the vulnerability of India’s banks revealed in answers to parliamentary questions tabled in the December 2013 session of Parliament.
The first (revealed in answer to parliamentary question no. 283 tabled in the Lok Sabha on December 6, 2013) was that between the periods ending March 2011 and September 2013, the ratio of gross NPAs to gross advances in public sector, old private sector and new private sector banks put together, rose rather sharply from 2.4 per cent to 4.3 per cent. Further, an overwhelmingly high share of the increase in absolute NPAs was on account of NPAs in public sector banks. While the share of the public sector banks in the increase in advances between end-March 2011 and end-September 2013 was 76 per cent, their share in the increase in absolute NPAs was 96 per cent. The ratio of gross NPAs to advances even declined in the case of the new private sector banks. This seems to strengthen the view that it is the state-controlled public sector that is the problem, requiring disinvestment in addition to financial reform to correct it.
Is the use of the public sector banks to deliver more credit to agriculture and the medium and small scale industries or to push priority sector lending in general responsible for this tendency? The evidence says it is not. More than 80 per cent of the increase in the ratio of non-performing assets to advances is on account of NPAs located in the non-priority sector. While there has been some increase in NPAs in advances to agriculture and the MSMEs, these are small in comparison.
Was the problem the flexibility and autonomy given to public sector banks managers under liberalisation that they were unable to handle? Here too the answer seems to be no. One of the notable features of bank lending has been the sharp increase in the share of advances directed to the infrastructural sector. In fact (according to figures from answer to question no 1584 tabled in the Lok Sabha on December 13, 2013), even in the short period between March-end 2011 and September-end 2013 the share of lending to infrastructure in the total advances of public sector, old private sector and new private sector banks put together rose from 13.2 to 15.7 per cent. Moreover, public sector banks account for as much as 86-88 per cent of the advances of the three segments of domestic banking to the infrastructural area.
On the other hand, there is evidence that many infrastructural companies are not delivering the revenues and surpluses that they were expected to yield resulting in defaults in payments of interest and amortisation due on bank credits, leading to debt restructuring and subsequent default. As at the end of March 2013, 23 per cent of all debt restructured under the corporate debt restructuring (CDR) mechanism was to infrastructural projects.
There is no reason why when provided flexibility and autonomy public sector bank managers would use the money of their depositors and rush to lend such large sums to capital intensive projects, loans to which are known to be more risky and more illiquid. The fact is, the idea that financial reform leads to less intervention and increases the flexibility and autonomy of public sector bank managers is a myth. What is worse under liberalisation is that, since the government wants to promote private entry into the infrastructural area, either independently or under the PPP framework, it has been pressurising the public banking system to support that process. The result has been much higher public, when compared to private, bank exposure to infrastructure. This makes high NPAs in the public sector a consequence of the pursuit of the liberalisation agenda by the government rather than the failure of public sector bank managers per se.
It is this rather than priority sector lending that is among the principal factors explaining the growing vulnerability of India’s public banking system.
Source:The Hindu
Friday, March 7, 2014
Schools without children, children without schools
On the day the Chhattisgarh government issued a statement emphasising how the Prime Minister’s adviser, T.K.A. Nair, praised the efforts to educate children, 32 students of Koynapada primary school in Darbha block in Bastar district did not attend school. In fact, they could not as the school does not exist. An official confirmed that the disappearance of the school establishes how employees attached to the education department are benefiting from the insurgency.
Since 2007, Rs. 6.45 lakh has been given to the Gram Panchayat to construct the single-storied school building of Koynapada. The Panchayat may say that the rebels are not allowing the construction but there are no Maoists in Koynapada, the official says. Meanwhile, the school receives Rs. 3.95 per day for each of the 32 kids enrolled there. Around mid-day, a wooden pedal for husking, a few metal pots and a robust rooster alone occupy the the makeshift classroom, which can barely accommodate 10 children. Students have eaten and left, says the head teacher, Ghasiram More. The funds for the school have come from the government’s flagship programme, Sarva Shiksha Abhiyan. Mr. More says several such schools exist on paper around Koynapada.
Why funds are given to non-existent schools remains a mystery but Mr. More’s repeated appeals to convert a school on paper to a real one have fallen on deaf ears.
Chintagufa residential school in Sukma district has a different problem. While the school has 200 students on paper, hardly 40 are to be seen. One teacher provides an explanation for this: “Some are unwell and [the] rest are on study leave.” Interestingly, in March last year, The Hindu visited the schools twice. On both occasions, there were no more than 50 students there. The school gets Rs. 950 for each of the students every month under the Rajiv Gandhi Shiksha Mission (RGSM). So, on paper, the school receives nearly Rs two lakh for the maintenance of children every month. Even if the school enrols 100 students, Rs. 95,000 cannot be accounted for every month. Sixty such residential schools are funded by the RGSM in Bastar division.
No lasting action
There is similar mismanagement in Chintalnar residential school, a few kilometres west of Chintagufa. Soon after a report in The Hindu last year, 10 teachers were sacked and a new single-storied building was constructed. Despite this, corruption in the name of tribal education takes place. A septic tank that was being constructed with poor quality material collapsed at Chintalnar during construction, says one of the teachers. The toilets are dysfunctional, forcing students to relieve themselves in front of the school at night and in the forest in the morning. The floor of the new building is peeling off, again because of poor quality material, state the building contractors. One contractor says 30 per cent of the fund goes to the officials as bribe.
Realising that it is beyond their capacity to eradicate corruption, the RGSM has decided to restrict the fund flow. “We released only Rs. 15 crore of the Rs.100 crore given to us in the last financial year. We are concerned about this pilferage,” Reena Kangale, chief of RGSM in Chhattisgarh, said.
But then Rs 15 crore is just the proverbial tip of the iceberg. In the budget, the State government allocated 12 per cent of the outlay — a whopping Rs. 6,559 crore out of the total Rs. 54,661 crore — for school education. While a large portion of the budget will be used to pay salaries, at least Rs 2,000 crore will be spent on tribal education, said the Minister of School Education and Tribal Development, Kedar Kashyap.
Anganwadis (day care centres for children) fare equally poorly. The day the State’s Economic Survey predicted a massive surge in GDP, the children of at least two anganwadis in south Bastar spent another day going hungry. The two childcare centres in the villages of Pinnabheji and Misma in Sukma district saw a complete failure of programmes designed to combat malnutrition. While the centres are supposed to provide rice, lentil soup, grams, beans and molasses, none of these is available. “The food from the local distribution society has not been arriving for the last two months,” says Jayanti Biswas, a teacher at the Pinnabheji centre. The children wear tattered clothes and worn-out reading material hangs from the wall. In addition, a tribal woman working in the centre as an assistant to Ms Biswas has not received her monthly salary for the last two years. The blame for this is attributed to paperwork, but the woman seems unaware of this. The anganwadi next to Pinnabheji, Misma, is better maintained, but has no food either.
Social and psychological issues
Other factors affect the children of Bastar too. The old practice of tribals — of keeping children in residential schools — is debatable as a large number of them miss their families and often slip into depression. However, they never receive psychological support. UNICEF began working with them but also left the project mid-way, doing more harm than good, says one of their former project coordinators. Moreover, several cases of sexual violence have surfaced and the removal of two clinics of the International Committee of Red Cross from Sukma and Bijapur has intensified health problems in schools.
Teachers are a rarity in all these schools. At any given point of time, it is impossible to find more than 30 per cent of them in any school, unless the schools are located in district headquarters or around the main cities. The head teachers of the two dozen schools visited by this correspondent have never been available in the last few years. The three oft-cited reasons for their unavailability were: “they have gone to the district headquarters to receive or deliver mails”, “they’ve gone for training” or “the naxalites are harrassing them.”
Being aware of the mismanagement and corruption, two schools — in Chintalnarh and in Chintagufa — offered ‘any amount’ to this correspondent. That is the norm here, one of the head teachers said apologetically.
The Ramakrishna Mission of Narainpur (RKM), established in 1985, runs schools in the interior areas. The Maoists, in 1980, warned the swamijis to avoid them. The rebels have never harmed anyone in the organisation in the past three decades. However, after the last Assembly election, the RKM was warned by the rebels for housing paramilitaries in one of their schools in Kundla in Abujhmarh. “We told them [the Maoists] that we did not initiate lodging [of forces] but it created severe problems,” said sources in the Mission. Housing the paramilitary forces in the schools, especially during elections, has forced the Maoists to issue a permanent embargo on the construction of schools, the officials feel. However, there is enough evidence to suggest that the teachers are never hurt or harassed by the rebels.
The good news is that even after all this corruption and mismanagement, the tribals of Bastar continue to send their children to study in government schools. In a way, the conflict has provided an opportunity for the State to enhance the quality of education.
Source:The Hindu
Since 2007, Rs. 6.45 lakh has been given to the Gram Panchayat to construct the single-storied school building of Koynapada. The Panchayat may say that the rebels are not allowing the construction but there are no Maoists in Koynapada, the official says. Meanwhile, the school receives Rs. 3.95 per day for each of the 32 kids enrolled there. Around mid-day, a wooden pedal for husking, a few metal pots and a robust rooster alone occupy the the makeshift classroom, which can barely accommodate 10 children. Students have eaten and left, says the head teacher, Ghasiram More. The funds for the school have come from the government’s flagship programme, Sarva Shiksha Abhiyan. Mr. More says several such schools exist on paper around Koynapada.
Why funds are given to non-existent schools remains a mystery but Mr. More’s repeated appeals to convert a school on paper to a real one have fallen on deaf ears.
Chintagufa residential school in Sukma district has a different problem. While the school has 200 students on paper, hardly 40 are to be seen. One teacher provides an explanation for this: “Some are unwell and [the] rest are on study leave.” Interestingly, in March last year, The Hindu visited the schools twice. On both occasions, there were no more than 50 students there. The school gets Rs. 950 for each of the students every month under the Rajiv Gandhi Shiksha Mission (RGSM). So, on paper, the school receives nearly Rs two lakh for the maintenance of children every month. Even if the school enrols 100 students, Rs. 95,000 cannot be accounted for every month. Sixty such residential schools are funded by the RGSM in Bastar division.
No lasting action
There is similar mismanagement in Chintalnar residential school, a few kilometres west of Chintagufa. Soon after a report in The Hindu last year, 10 teachers were sacked and a new single-storied building was constructed. Despite this, corruption in the name of tribal education takes place. A septic tank that was being constructed with poor quality material collapsed at Chintalnar during construction, says one of the teachers. The toilets are dysfunctional, forcing students to relieve themselves in front of the school at night and in the forest in the morning. The floor of the new building is peeling off, again because of poor quality material, state the building contractors. One contractor says 30 per cent of the fund goes to the officials as bribe.
Realising that it is beyond their capacity to eradicate corruption, the RGSM has decided to restrict the fund flow. “We released only Rs. 15 crore of the Rs.100 crore given to us in the last financial year. We are concerned about this pilferage,” Reena Kangale, chief of RGSM in Chhattisgarh, said.
But then Rs 15 crore is just the proverbial tip of the iceberg. In the budget, the State government allocated 12 per cent of the outlay — a whopping Rs. 6,559 crore out of the total Rs. 54,661 crore — for school education. While a large portion of the budget will be used to pay salaries, at least Rs 2,000 crore will be spent on tribal education, said the Minister of School Education and Tribal Development, Kedar Kashyap.
Anganwadis (day care centres for children) fare equally poorly. The day the State’s Economic Survey predicted a massive surge in GDP, the children of at least two anganwadis in south Bastar spent another day going hungry. The two childcare centres in the villages of Pinnabheji and Misma in Sukma district saw a complete failure of programmes designed to combat malnutrition. While the centres are supposed to provide rice, lentil soup, grams, beans and molasses, none of these is available. “The food from the local distribution society has not been arriving for the last two months,” says Jayanti Biswas, a teacher at the Pinnabheji centre. The children wear tattered clothes and worn-out reading material hangs from the wall. In addition, a tribal woman working in the centre as an assistant to Ms Biswas has not received her monthly salary for the last two years. The blame for this is attributed to paperwork, but the woman seems unaware of this. The anganwadi next to Pinnabheji, Misma, is better maintained, but has no food either.
Social and psychological issues
Other factors affect the children of Bastar too. The old practice of tribals — of keeping children in residential schools — is debatable as a large number of them miss their families and often slip into depression. However, they never receive psychological support. UNICEF began working with them but also left the project mid-way, doing more harm than good, says one of their former project coordinators. Moreover, several cases of sexual violence have surfaced and the removal of two clinics of the International Committee of Red Cross from Sukma and Bijapur has intensified health problems in schools.
Teachers are a rarity in all these schools. At any given point of time, it is impossible to find more than 30 per cent of them in any school, unless the schools are located in district headquarters or around the main cities. The head teachers of the two dozen schools visited by this correspondent have never been available in the last few years. The three oft-cited reasons for their unavailability were: “they have gone to the district headquarters to receive or deliver mails”, “they’ve gone for training” or “the naxalites are harrassing them.”
Being aware of the mismanagement and corruption, two schools — in Chintalnarh and in Chintagufa — offered ‘any amount’ to this correspondent. That is the norm here, one of the head teachers said apologetically.
The Ramakrishna Mission of Narainpur (RKM), established in 1985, runs schools in the interior areas. The Maoists, in 1980, warned the swamijis to avoid them. The rebels have never harmed anyone in the organisation in the past three decades. However, after the last Assembly election, the RKM was warned by the rebels for housing paramilitaries in one of their schools in Kundla in Abujhmarh. “We told them [the Maoists] that we did not initiate lodging [of forces] but it created severe problems,” said sources in the Mission. Housing the paramilitary forces in the schools, especially during elections, has forced the Maoists to issue a permanent embargo on the construction of schools, the officials feel. However, there is enough evidence to suggest that the teachers are never hurt or harassed by the rebels.
The good news is that even after all this corruption and mismanagement, the tribals of Bastar continue to send their children to study in government schools. In a way, the conflict has provided an opportunity for the State to enhance the quality of education.
Source:The Hindu
Subscribe to:
Posts (Atom)