Advertisement

  • News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Not A Very Bright Idea

The proposed gold monetisation scheme to bring the idle gold lying in Indian homes to the banking system may prove to be a costly affair for banks. In the past, the Gold Deposit and Gold Metal Loan schemes have not been popular because of the low interest rates offered on those schemes. The proposed scheme will allow banks to sell the deposited gold to generate forex. However, the cost of refining the gold along with payment of interest on the deposits may prove costly for banks.

Photo Credit :

The proposed gold monetisation scheme to bring the idle gold lying in Indian homes to the banking system may prove to be a costly affair for banks. In the past, the Gold Deposit and Gold Metal Loan schemes have not been popular because of the low interest rates offered on those schemes. The proposed scheme will allow banks to sell the deposited gold to generate forex. However, the cost of refining the gold along with payment of interest on the deposits may prove costly for banks. Moreover, gold as a commodity has an emotional value for Indians who may not like to part with it. Another area of concern is proof of ownership, which would be required before banks can accept the gold from people. Gold in India has been used to hoard black money in a secured form. Bringing it into the formal system may not be profitable for a majority of the people.
— Neeraj Thakur
 
Pull Before Pushing
Arvind Panagariya, vice chairman of NITI Aayog, stated the obvious when he blogged that most farmers would prefer to quit farming if they could get a job in the city. The world over, people aspire to lead comfortable lives, and the jobs that industry and the services sector offer tend to be more remunerative, less strenuous and hence attractive. Better healthcare, education and transport also sway farmers’ choice in favour of urban life. Panagaria is also right when he says that the expansion of industry and services can happen without threatening India’s food security. What he did not say, though, was that the recent farmer agitations against the land acquisition Bill were not in conflict with their aspirations for a better life. Such agitations stem from the farmers’ belief that there is overplay of real-estate interests in land acquisitions. The farmers could be wrong. But then, it is the duty of a democratic government to dispel their doubts before steamrolling legislations. Prime Minister Narendra Modi has a lesson to learn from the CPM, the Leftist party that lost power in West Bengal only due to its enthusiasm to industrialise Nandigram in a hurry. 
— Joe C. Mathew
 
Laggards Beware
The Centre’s stance that it will finance only the better among state-run banks is set to badly bite laggards in this universe. Given the state of the fisc, there’s no way the Centre can infuse nearly Rs 4 lakh crore that is needed under Basel-III norms, which kick in from fiscal 2019. Simply put, it’s ration time on the capital infusion front. The tier-1 capital adequacy ratio of many state-run banks stands at 8 per cent (below the regulatory floor of 9 per cent). The five-year average return on assets between 2014 and 2019 is seen at a low 0.6 per cent. Raising capital through dilution of the Centre’s stake in some of these banks is a challenge given the low valuations. It’s so bad that Crisil forecasts that in the run up to Basel-III, private banks will grow at double the pace of state-run banks; in fact, the former’s combined profit will be higher than that of the latter!
— Raghu Mohan
 
No Guns For Hire
A spurt in attacks on customers at ATMs and vans of cash logistics firms (CLFs) is the direct result of pussy-footing matters security. Industry sources point out that roughly 4,000 licensed guns are needed to run daily operations of banks and CLFs; there is a shortfall, but the Home Ministry is yet to take a call on the matter despite alerts sounded by them. It’s only a matter of time before aggrieved customers haul banks to courts for damages. In the case of CLFs, some already have legal issuers with insurers — they need to provide armed guards to get cover for the cash and valuables they move. To get a sense of the cash on roads today: the big four CLFs — CMS, Brinks, SIS-Prosegur and Writers — with an 80 per cent market share, on an average, cart 
Rs 20,000 crore in cash daily or a whopping Rs 73 lakh crore. It’s flashpoint time.
– Raghu Mohan
 
Shriram Award For BW Staffer 
Businessworld deputy editor Raghu Mohan won the prestigious Shriram Sanlam award for excellence in financial journalism for the year 2014. The award winning article was in the category of “financial institutions”. This is the second time that Mohan has bagged this award. In 2012, he won the prize for his article in the “macro economy issues” category. The award comprises a cash prize of Rs 1,00,000 and a certificate of merit. Businessworld’s associate editor Shailesh Menon was also among the shortlisted candidates for the award.
 
Life Beyond Mallya
United Spirits, the country’s largest alcoholic beverages maker, is undergoing a complete transformation and an image makeover. The company is revamping its management structure and creating a well-defined functional centre for corporate relations and communications under former Diageo India head Abanti Shankaranarayanan. The aim is to be seen as a consumer products company rather than continuing with the tag of a traditional liquor maker, to gain the confidence of  policy makers, civil society and other stakeholders. The ‘Performance Ambition’, as the company calls this process, is aimed at building a more sustainable growth model. But it is obvious that the new entity wants to regain its lost reputation and emerge from chairman Vijay Mallya’s shadow.
 
Reason: It wants to develop the business with the aim of capturing the affluent and premium market segment in which Diageo is a strong player globally. United Spirits, which controls more than 60 per cent of the country’s Rs 1,00,000 crore Indian made foreign liquor market, also wants to be a leader in the alcohol industry by setting standards both in terms of business and social responsibility, and thereby gaining influence in the policy-making process , which is crucial for the sector. The new image that the company wants to project certainly excludes Mallya. It appears that his likely ouster from the company has a larger context and is not just a mere boardroom battle. 
– C.H. Unnikrishnan
 
(This story was published in BW | Businessworld Issue Dated 15-06-2015)


sentifi.com

Top themes and market attention on: