May 31, 2013

Does India Need New Banks?

The Economist had this article talking about the imminence of new licenses for the opening of banks in India.

And I put in a couple of long comments on the article. Here they are.


I will be extremely worried if Reliance gets a banking license.
And why does Indian banking need Mr. Vikram 'Citi' Pandit's punidtry in Indian banking?
Haven't American banks including Citi, JP Morgan and all the other too-big-to-fail banks and other financial institutions including hedge funds caused enough havoc to the American economy?
Have not the GREED of a few men to make millions and billions of dollars per year caused enough unemployment for millions of Americans?
We do not want a repeat of the mistakes of America.


Already banks like HDFC and ICICI are fleecing customers by imposing little charges and in other ways.
Looking ahead to 2020, I do not wish The Economist or other publications putting out a 'list' or 'ranking' of the Top Earning Bankers of India which will presumably figure Mr. Pandit, Ms. Kochar, Mr. Kotak, Ms. Sharma, Mr. Puri, Ms. Morparia, and so on ...
And no, these new banks WILL MOST CERTAINLY *not* be providing banking services to the poor millions who thus far have been deprived of banking services.
That social responsibility will fall inevitably on the PSU banks or the public sector banks.
It's simple.
When you "allow" private super-specialty healthcare such as Medanta Medcity by Mr. Trehan, Apollo Hospitals, Fortis, and so on, they are not going to be meeting the need for healthcare services by the hundreds of millions of poor. These premium hospitals cater to the thin rich strata of Indian society plus patients from abroad including Africa, Iran, and so on.
When you let new "high end" *international* schools to open which charge astronomical fees and have AC schools and school buses, they DO NOT cater to the poor masses.

The only government initiatives or decisions or legislations that will have mass impact and far reaching consequences are MNREGA, the Food Security Bill, Right to Education Bill, Direct Cash Transfer, and perhaps the Land Acquisition Bill.

A reader responded to my comment with this:

I'm a bit confused here.
Are you saying that companies that cater to the rich should not be allowed?
Or merely that it is a fallacy to think that companies that mainly cater to the rich, while legitimate, are of little use in helping the status of the poor?
The two are different positions.
And my response was:
I guess I am saying that we have a tendency to focus too much on matters that do not affect a vast majority of people.
If I may give a few random examples:
1) A criminal like Bernie Madoff expresses 'remorse' or whatever from prison and the papaers carry it. Pointless in my opinion. Though one caveat in his case would be that his clients were probably mostly rich folks.
2) The need to make millions by bankers, hedge fund guys and other financial types in Wall St. has brought so much grief to millions in the U.S. and yet the grip of lobbyists is so vice-like that the political system has been able to do very little to rein in this monster of a financial system.
I am afraid that Indians merely ape (the worst aspects of) Americans. Therefore, policymakers will be easily persuaded by their 5-star drinking buddies and we will soon have these obscenities such as ranks of the richest ... richest players, richest bankers, richest CEOs, and so on.
People tend to be interested in silly stuff. In India, everyone is sadly obsessed with cricket. Therefore, a few silly young men make millions. It's no wonder if a few of them are 'tempted' to make even more through spot fixing. The problem would obviously solve itself if people stopped taking interest in cricket.
The strange tale of Sahara stretches on. I do not think the Indian legal system would be able to punish rogues like Subroto Roy. Or Kalmadi or other real estate criminals. If we have a banking system that goes out of control, we will merely have more Roys and Kalmadis that the system won't be able to catch because they will be able to manipulate the system.
If the government allows more banks with shady credentials, that will merely lead to more money laundering if not anything more dubious.
May be India should try to compete with Cyprus and other 'tax free' havens so that Russian billionaires and Apple, GE and other American MNCs park their hundreds of billions in India.
I am confident that India will manage to faithfully repeat all the mistakes of America. India is good at absorbing the worst bits of foreigners while neglecting the good bits such as innovation, creativity, new thinking and a Renaissance spirit.
Who was that guy from 500 years back who drew the first drawings of a helicopter ... oh yes, Leonardo da Vinci. Bill Gates apparently still feels 'inspired' by him. Indians are merely inspired by Bill Gates because Gates got MONEY!

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