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In the Name of Growth  All Top Banker and  Corporate Heads  Want to Crush Poor and Middle Classes

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Rajesh Goyal 



Once again on the eve of Second Quarter Review of Monetary Policy,  CMDs, of some public and private banks, alongwith corporate heads have started the chorus of need for  rate cuts by RBI.   For last few years, it has become customary to flog RBI (specially in days before the review of Monetary Policy) for hampering the growth and not doing enough for the economy.


I have failed to understand this type of hype being created by bankers and corporate every six weeks.   I could understand such differences in perceptions when a new Governor is heading RBI or a politician working for his votes.   RBI Governor has made his stand clear on hundreds of occasions - every time before and after the review of policy and in number of speeches delivered on various occasions.    In the beginning  I  too was thinking this is a healthy sign that such issues are discussed in open.   However, the continuous stand off between RBI on one hand and Top Bankers like Mr Pradip Chaudhary, Mr Kamath and Corporate heads on the other hand, has forced  me conclude that one of the following statements is true :


(A) Mr Subbarao, RBI Governor is a fool and does not understand  the Indian economy and  banking in India, and how growth can be achieved, inspite of being told every six weeks about the need for immediate rate cuts;


(b)  All  public and private sector bankers and corporate are fools and do not understand the Indian economy and banking in India and how to achieve the growth, inspite of being told on hundreds of occasion that control of inflation is of the prime importance;



Thus, we can conclude the fight is between one person (RBI Governor)  on the one hand and the whole elite class of bankers and corporate heads (I forgot to include here FM as he too has frequently shown his disdain with RBI Governor on this issue) on the other hand


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In normal circumstances, if it is one person vs large number of so called intellectuals,  I too would have voted that first statement is true.    But inspite of the balance heavily tilted by weight of so many big-wigs of banking and corporate, I would prefer to go with RBI Governor.   The reasons are simple if we just peep into the life around us.


I was just imagining that had it been between a CMD of a Bank and a GM of the same bank, how CMD would have reacted?  For example, CMD / ALCO  of "A" Bank announces a policy that in the interest of the bank it is not good to reduce interest rates for Auto Loans.  On the next day, a press statement is issued by GM of the same bank saying "CMD is not allowing growth of the bank and is fussy about not reducing interest rates for auto loans".     On the eve of each ALCO meeting, few GMs go to the press and issue statements that "CMD is a big hurdle in the progress of the bank and for the growth of bank  cutting interest rates on Auto Loans by at least 2% is a must".  How would you term such logjam and will CMD allow this to continue where his own juniors criticize him in press for his views.   I am sure no CMD will tolerate this.  



Inflation, specially the food inflation, is not showing any indications of being under control.   Who is hit by such inflation?   It is the poor, middle class and retired population.   This class has limited income and large part of the same is spent on necessities.   The real rate of return from any kind of investment today is negative for this class of people.    On the other hand top bankers, corporate heads and politicians have fat salaries and have other sources of income (e.g. property deals like Vadra episode), wherein their assets multiply by 10 times in one or two years.   They are least affected by such inflation.



Top bankers cry that growth can not be sustained as they are not able to cut rates due to RBI policies.   Has any such CMD has shown concern for sharp rise in NPAs?  At the time of announcement of results, they simple say, next year we hope these will reduce ?   Have they ever thought that they are fleecing the rural population by keeping suppressed Saving Bank rate of interets at 4% as poor and middle class have no alternative but to stick with them.    They never show concern for the poor to whom they are paying negative returns (after adjusting for inflation).  Why ?   They are always interested only to protect the interests of corporate in the name of growth of the nation. 


I would like to ask top bankers and corporate heads, as to how much impact it will make on the prices of their products if we reduce rate of interest by 50 bps?    I am sure reduction by 50 bps or so will not reduce the expenses by more than a small fraction.     Has any CMD got done any study of their any corporate balance sheets to conclude about the actual impact this can have on corporate profitability. 


The voice of common man is being crushed by media too and they only highlight the statements which are pro-corporate and pro-bank management.   I would like to quote from a comment I saw on one of the blogs  on news about how bankers want to cut interest rates.   The comments read "RBI knows that cutting rates means stealing from the poor and middle class what little they have right now, in effect kicking the poor man on his stomach.    The Shikha Sharmas and Chanda Kochars can step on the poor man's throat to meet their growth targets". 


I am not sure  why that reader chose the names of two ladies, but top bankers should know that such comments are pointers to underlying resentment among the general public for the apathy shown towards them by bankers and corporate heads.     There is a  needs to be sensitive to the poor and middle classes who are being crushed by keeping the deposit rates low, educational rate of interest highest as compared to car / auto loans.  CMDs and corporate needs to look beyond their own business targets and profits.


I would like to remind that people Below Poverty Line are today even more than what it was at the time of independence inspite of all the growth figures shown to us in all these years.  There is more black money generated today than a decade ago.   The majority of this blame goes to corporate and banks only.     Growth does not necessarily result in upliftment of poor, but may merely add to the ill-gotten wealth of rich.   In such circumstances, growth may not be priority.


Therefore, it is time for the bankers and corporate  not to cheat poor people in the name of growth of the nation.  This is the time when poor and middle classes should be supported in their fight to beat inflation and corporate needs to slash unnecessary pump and show and reduce wasteful expenditure.  Banks should concentrate more on reducing NPA and provide only quality credit and not give loans based on negligible collaterals.   They also needs to concentrate on HR issues as neither senior bankers nor junior bankers are happy with the present kind of policies of the banks.



I hope RBI Governor will continue his head high and will not bow to such pressure tactics on 30th October 2012.   Certainly, he should do whatever is in the interest of the poor and middle classes, and long term growth of the nation.  He is not here to ensure that high profit targets are met by banks and corporate at the expense of poor.





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