Gold Rush

It has been so long since I wrote anything on my blog.

But this mad gold rush made me share my thoughts again on this platform.

When ever we open a news paper, crime section carries at least one story which has direct nexus to gold. Price rise for gold is taking crime rate also along with it. Thugs are committing crimes only for gold. And, we hear, it is easy to sell gold on the street nowadays. No questions asked. Form where you brought it, the source etc, is not at all concerned. Whether it is owned or stolen, no, no questions. As long it is gold, it will easily be sold. In one recent day light robbery, I was astonished to read, the thug has not touched silver which was also lying with the gold in the same rack. The reason, it is simple, it is easy to sell gold than silver and gold rates are high, much higher, compare to that of silver.

Why all this? What it indicates?

It indicates people are crazy to buy gold because they believe, in future, the demand for gold is going to gain momentum. The fundamentals in gold are strong. High inflationary pressures are reassuring these theories. The money is flowing into gold from all directions. We all know that the inflation pushes price up and brings the value of money down. What you can buy today for x rupees, you can not buy tomorrow because of the price rise. Only buying of gold will give you maximum returns in case of acute inflation. It constantly goes up and is the best bet during the inflation. The net result, gold rush.

Is this gold rush good? or is it the same mad rush, that has happened almost a century back in the similar circumstances. May be may be. But if one looks at the present situation, will be tempted say yes. Because, there are rumors on the street that the same forces which have rigged the stock market, earlier, have entered into gold market hence this speculation. Price rise is justified in the back drop of high inflation but not these extraordinary fluctuations. People are silently watching, wondering whether this bubble is going to get burst or is it real reflection of genuine demand.

Monetary policy – same drug for all diseases

The Monetary policy for this season is out. As expected, Apex Bank has increased the bank interest rates to counter the inflation

It is human nature that, come what may, we do, in fact, we are habituated to do what we know most. It is also human to play safe and tread on a beaten track. The recent monetary policy reflects this mind set. We know and we can understand that it is inevitable but to hike interest rate to bring money back to banks. But, is this only tool that is available in the hands of policy makers to tackle a devil called “inflation”

What is the scenario: The inflation is too high. It shall be brought down.

What is prescribed: To offset inflation, the following is prescribed under the policy:

a) To increase rates of interest

So that deposits will attract money back to banks and it reduces the circulation of money in open market. That increases money value and drives the prices and thereby inflation, down. RBI has done the same. Adjusted the rates of interest on savings

b) To decrease proposed GDP

It is like one step up and two steps back. Even before we actually encounter apprehended problem, one feels, the reduction in GDP targets sends weak signals, which, by looking at the situation, are not really warranted.

Underlying assumptions for policy statements:

a) Good Monsoon, which is beyond our control

b) Stable, more or less, oil prices, which is again contingent

What is the side effect: Increase in interest rates deprives cheaper credit to manufacturing sector and Agriculture sector which is vital to bring prices of commodities down and thereby inflation.

Why fundamentals for this Inflation are ignored: This inflation is not because of excessive supply of money. It is because, lack of supply of agriculture produce. Every one knows that this inflation is the result of the supply side problems. This is another way of looking at the challenge.

What should have been done: Therefore the solution is to provide support to agriculture and increase the production. Increase more credit or cheaper loans to agriculture and soft loans to supply chain issues in the agriculture sector and also to manufacturing sector, which is much needed and long awaited. Further, proper water management, seeds, cold storages, distribution points, supply chain issues etc require lot of support from banking sector. This increases agricultural production and eases pressure on prices. This will also cool inflation pressures.

There is a feeling in some quarters, our apex bank could have little more innovative the way it used to be and paid little more attention to the fundamentals. Instead of examining the nature of inflation, instead of understanding whether is it due to supply side or demand side pressure, it has resorted to interest hike. Is it in sync with our union budget, which, as all of us seen, had treated this inflation as a result of supply side pressure and had aimed at adjusting the same by laying proper emphasis on Agriculture and Manufacture and giving prominence to both the sectors. We shall wait and see.

Mukesh Ambani –DE Shaw Likely To Set Up India’s Largest Private Bank

We draw your attention our blog “ Banking Licenses to Private Players - A pretty good move”

posted on on 17^th August, 2010.

Now the captioned news suggests that already action has begun in that sphere. Mukesh Ambani group is joining hands with DE Shaw to enter into banking business in a bigway.

It is heartening to note. At the same time, lingering doubts conquering my mind that by any chance even this space will also be occupied by the big boys the way it has happened in the case merchant bankers and primary market.

Allowing private banks to operate is a good move. But if you look at the policy statements of late, these decisions are mostly giving only big players a room to play. The field is totally occupied by them. Agreed that these are all capital intensive activities, but, markets shall be conducive for mobilization of capital and not for the concentration of capital in few hands which is neither good for the country, economy nor for healthy competition.

Therefore steps shall be taken to make as many people as possible, especially, from rural sector to participate in this process to give a true meaning to the words “ collective growth” , “ inclusive growth” etc.

Setting aside all this, we shall welcome this venture and the financial innovations that will come along with it and we sincerely wish that this synergy shall bring global financial opportunities to our Indian corprates.

Governance deficit

Anna Hazare objected committee to be headed by a politicianfor drafting lokpal bill

Supreme court ordered delhi police to investigate….Supreme Court ordered to precipitate investigation into 2G scam…

So on and So forth…

What is this all about? This indicates that our political system is weakened. The Judiciary orders government to do this and do that. An activist goes to the extent of saying that politicians shall not be there on committee which is making a policy which is purely and perfectly a politician domain. Why other institutions like, judiciary and non constitutional authority is becoming powerful and dictating terms to politicians. What made them act in such an arrogant manner? If you watch the present scenario clearly, we can understand that, it is not their power; it is the weakness of our political system that is making other institutions powerful. Today good people are manning these. Tomorrow, if these institutions fall into the hands of evil forces, what is the fate of the country?

Our political system, if not fail, at least, we can deduce that it is not so successful.

What is the reason? Many on the net voiced that they support Anna Hazare unequivocally. Not many know who he is. Probably, the media which made him hero overnight, might not know the kind of achievements this gentleman has achieved in the water management and other related areas. But, people, unaware of his great achievements, driven by media publicity, blindly, but correctly, fought each other to support this old man by lighting candles, facing cameras and does everything to tell the world they are with him. Suddenly it has become a cult to talk about corruption, as if anna or some media bhai switched on some mysterious light on it, as if it has appeared all of sudden, out of the blue.

Is it? Is it for first time, are we coming know that there is corruption which is rampant in this country? Is it not true that we are sleeping with this snake called corruption since ages? Is it not true that ignoring problems in our own vicinity or abstaining from exercising our franchisee at the time election has bred this snake? The right that the constitution of India has given us, a right to vote, is it not enough for us eliminate this corrupt politicians? Is it not open fact that poll percentages are always low in the areas where this so called educated populace reside? Or are appearing on TV or writing slogans on the net, is the only way to kill and end corruption?

I salute Anna for raising this debate. Other wise, we are not only becoming corrupt, we are quickly accepting it as a part of life, which is all the more dangerous.

But, if we can handle this menace in our own life and in our immediate vicinity, I feel, we can be rest assured that we have paid enough tribute to our hero called Anna Hazare.

It is a Budget of indications, futuristic

Kudos to dada. We shall appreciate our FM for presenting such a pragmatic budget. Its true, there are no major policy announcements. It is also true that FDI in retail is not yet open.

But,

If you look at it as whole, it is has almost everything that our country and our economy needs to day. It has basically addressed three major concerns:

a) Agriculture

b) Manufacturing and

c) Inflation

FM has exactly done this. By doing this, he has achieved another balancing act. What is that? He knows that to counter inflation, he shall increase interest rates. So that deposits will attract money back to banks and it reduces the circulation of money in open market. That increases money value and drives the prices and thereby inflation, down.

But increase in interest rates deprives cheaper credit to manufacturing sector. This is exactly where our FM has shown uncanny ability to handle the situation. Solution lies in the nature of the problem itself.

This inflation is not because of excessive supply of money. It is because, lack of supply of agriculture produce. He also knows that inflation is the result of the supply side problems. This is another way of looking at the challenge and handling all at once.

Therefore the solution is to provide support to agriculture and increase the production.

AGRICULTURE

Adding cold storage to infrastructure list can be regarded as major step towards right direction. It has addressed the core of supply chain issue. Cause, we are all aware, it is lack of distribution of agriculture produce not production of it, which has created scarcity. So are, your cold storages, soft loans to farmers, capex of fertilizers to treat as infra expenditure, so on and so forth. This increases agricultural production eases pressure on prices. This shall drive inflation down.

MANUFACTURING

It requires cheaper credit. On the other hand, as far as the manufacturing is concerned, he has shown his wisdom by leaving excise and customs almost untouched. These measures along with reduction in surcharge and marginal increase in MAT would definitely allow manufacturing sector to grow. Again, targeting that the contribution from this sector shall reach 25% of GDP in decade, would imply that the many more sops are in offing.

SERVICE

As far as service sector, it is excluded as it is a very healthy baby, it has shown how to take and it has got some giving to do now. Service sector has grown enough. Major revenue can be obtained from this sector. Agriculture badly needs support and it is required. Manufacturing sector requires a long term helply hand.

CHALLENGES

Major cause of concern is to address deficit through sale of assets and not out of revenue receipts or reduction of expenditure. Another major concern is oil prices. The prices of crude oil are soaring due to disturbances in Middle East. If they remain high, FM has nothing in his hands to offset the effect of it.

Debates – isn’t it a healthy habit

We have started this blog to raise contemporary issues.

We would like to raise contemporary issues in the commercial world. When we said, world, we truly mean it. Contemporary issues in commercial world mean any issue on this planet which is related to commerce and which in any way effects corporate world.

We welcome every one to write anything that they feel would reflect this.

We welcome a healthy debate. A debate, we feel, would generate a master mind which is always greater than the collective minds that have produced it. Touching different points, raising different questions, examining in different angels and analyzing different issues will bring real cream of the issue to the surface.

Be it environment or be it telephone tapping, be it labour legislation or be it global markets, any thing and every thing requires thorough debate and understanding. We offer this blog as platform for these debates,

happy blogging

Knowledge Management

Recently, I have received a mail from one of my friend that he has been invited to deliver a lecture on knowledge management. He has also forwarded content of the proposed seminar. It brought my past thoughts to the surface which remained in dormant for so long due to constant demands of my daily routine. Having spent equal time in both manufacturing as well as service industry, my mind constantly draws similarities between these two.

Knowledge is to service industry, in my opinion, as to what raw material is to a manufacturing concern. Knowledge, for service industry, shall deserve same respect and same treatment. Based on services, a firm offers, a proper knowledge base is essential to achieve a quick, quality turn around time and thereby consumer satisfaction. A proper adequate levels of quality retrievable knowledge base, like raw material, will do wonders in rendering timely quality deliverables by professional firms.

It is confirmed, by now, for service industry, one’s knowledge base is one’s raw material. Growth in service sector has necessitated search for new ways and new methods in rendering services. So is the application of erst while theories, such as six sigma, lean theory etc to the service industry. These theories have been modified and made applicable to the service industry. For proper application of these theories, certain customized services had been termed as products, so that the application of these theories can be properly appreciated, understood and applied.

The adequate quantity and quality of ones raw material determines timely delivery, quality and profit margin for manufacturing concern. Similarly, adequate knowledge base, timely retrieval and delivery determine the client satisfaction since here, unlike manufacturing concern, the delivery and consumption coincides. Here comes the importance of proper management of the same.

Knowledge management for service industry is nothing new and is an extension of these applications. Looking back, banking industry, has first realized its significance. Since then, various industries, engaged in service sector, slowly started adopting these theories which were hitherto applicable to manufacturing concern till then.

Knowledge management will try to achieve a base which is current, adequate and appropriate to enable a service organisation to render a timely quality deliverable.

Lets wish my friend good luck and their seminar be successful in bringing more and more inputs on this.

oblivion

For a short period, due to personal reasons, I was away. I was totally preoccupied and could not write anything on my blog. Now I am back in the office and I would like to continue what is close to my heart, that is, writing ie expressing and sharing my views.

Stock Markets - Rural Investor

The Stock Markets are now predominantly controlled by Urban Investor. Further, these investors are a group of few players who conduct predominant part of the trade.

We wonder whether it is good. One can not dispute the fact that any market, if it is controlled by minority, will not be healthy. Further, liquidity is oxygen for stock markets upon which they thrive. Liquidity implies participation by majority, in other words large number of players.

If you look at our markets from this perspective, what appears so glaring is absence of Rural Investor.

Investors from rural areas are still ignorant about the on goings of Capital Markets. Their investments are mostly going into traditional areas. Internet, Online technology, technological advancement etc., are failing to bring rural investors to the market. We need to appreciate the Indian Corporate Ministry’s efforts in this direction. They were constantly conducting investor’s awareness programs in rural areas to educate and to encourage rural investor.

We honestly feel that such initiatives shall be supplemented by certain other measures, such as investigating into the questions like

- What is investment culture that is prevailing in rural areas

- Why this rural investor is unaware of this market

- Is he unaware or is he not interested etc

The Ministry of Corporate Affairs, the way it was collaborating with the professional bodies for conducting investor awareness programs, it shall also, on the same lines, encourage professional bodies, business schools, researchers, NGOs, Voluntary Organisations etc to explore proper answers to these questions and to suggest suitable remedies in these areas.

The Securities Exchange Board of India (SEBI) which is apex body in regulating stock markets shall facilitate rural investor with some preferential reservation in every Public Offer.

Online stock brokers shall be encouraged by giving some tax incentives for rendering services to rural investor in the rural areas.

We shall do everything to bring our rural investors to main stream of stock markets. Shouldn’t we?

Banking Licenses to Private Players - A pretty good move

It’s a welcome measure. If this initiative is coupled with innovation, then it’s going to provide hybrid varieties of financial products for corporate as well as individual customers. Caution, however, is essential as far as this sector is concerned, cause, corporate financial intellect, driven by greed, has the ability to blur the line between innovation and undue speculation. Ultimately that leads to crash. History has many examples.

Coming back to sources of funds, by what ever name we call, all the financial sources would fall into two broad categories, that is to say, equity or debt. In other words, either own or loan funds. One needs to access Capital markets for equity and debt markets for debt. Though, our capital markets are going strong, compared to these markets, the debt market has neither attained that maturity nor has liquidity to that extent.

This has happened, due to so many reasons. One of the prominent reasons amongst these is the extinct of NBFCs (Non Banking Financial Companies) and the other one, is lack of retail lenders faith in the concept of deposits. The RBI, the apex body to regulate this sector, was successful in killing this sector. When some corporate misused this concept and resorted to unfair trade practices, the RBI, instead of setting things right, acted in haste, had shut the door altogether. Consequently, the genuine corporate, have lost one predominant avenue for raising short term funds. On the other hand, the retail lenders have, due to lack of faith in the system, refrained from depositing money either with NBFCs or with corporate altogether. In the essence, one lucrative concept has lost its sanctity.

The present initiative falls in the same domain.

We firmly feel, RBI will not, this time, as far as licensing of these private banks are concerned, do anything that kills the avenue itself. The discussion paper is out for all of us to contribute. It has points worth discussing. Firstly, deciding upon the adequacy of capital norms and quantum of foreign equity. Secondly, we need to carefully analyse whether this move really reduces the transaction cost, which is, again, one of the primary objective. Thirdly, how this move will impact bad loans. And so on so forth.

We will make our own squirrel’s contribution to it.

Life without mobile

Till the other day, I didn’t know that life without mobile is so beautiful. It has happened one day. My mobile battery was totally discharged and cell got switched off. That morning, it was so pleasant and stress less and I didn’t understand why. When I saw my mobile later, I understood the reason for this serenity. It was off. I didn’t know that life with out it will be so serene and peaceful. Therefore, I decide to switch it off everyday, in the morning, till I reach my office.

By Polls - AP, a patient in ICU needs procrastination or action?

Politics and economics are inseparable and they are interwoven. We can not pinpoint where the line, which divides both, will exactly lie. So are the results of AP by polls. Polls indicate passions are burning. It has both economic and political ramifications. It is a clear Message to all those who are concerned. Clear verdict. It is straight and loud to those, who are sitting at the helm. A simple message, we want Telengana.

What we need to do is to face the unavoidable. Now the division, I feel, is unavoidable unless situation drastically changes. In other words, passage of time shall douse these fires. May be or may be not. In the given scenario, action is much needed than procrastination to put out these fires. A patient in ICU needs immediate and proper attention. So is the situation in AP. It is already in critical condition and needs immediate and proper attention and action.

The Investors will primarily look for stability and security. Naturally, when such a big decision is taken and separation is being made, normal life does get affected. We can not expect things to be normal and business as usual.

But policy makers and politicians must ensure that the talk of division shall not become poisonous. As it is, the situation in Andhra Pradesh and especially in Hyderabad is deteriorating. No investments are forth coming and existing players are in two minds whether to stay or to shift to a safer place. The procrastination shall not cuase such an irreparable damage and situation shall not deteriorate to such a level wherein nothing can be salvaged.

I can clearly see, the economic situation of AP is already in ICU. It needs intensive care to make it normal. The only remedy, as it appears today, is to precipitate the action. Slightest procrastination on the part of politicians, one can draw parallels to an unattended patient by a doctor at the ICU.

Silver lining

It is a general economic theory that post separation or post war situation throws up lot of opportunities. Investments will come back and come back in big way provided the division is smooth and the peace reigns. To see that day, we need to act now. What happens otherwise? Let’s pray the god.

Of late, other things have kept me busy. Added to this, there was no significant activity around, therefore, I was mum for some time.

Finally when I saw RBI is in for increase of rates, I felt I shall share my feelings.

Increase in interest rates – A Tuglaq’s move

It is natural that once inflation is high, it reflects both in gold as well as in interest rates.

Gold is an antidote and works against inflation. People park money in gold as it constantly negates inflation and abnormally increases in value during inflation.

The Interest rates will be hiked to increase deposit growth rate. The emphasis will be on savings. Objective is to take money out of the system and put it in the bank. This reduces availability of money in the system and value for money increases and it drives prices down and consequently inflation will also cool down.

This is economics and it is only one side of the coin. But situations will not be similar to what they describe in the text books.

What we are facing here is a peculiar situation wherein both inflation as well as industrial slow down is present. To counter industrial slow down and create jobs, we need to push production up. So that supplies will increase. More and more supplies bring prices and inflation down. In order to do this, Industry needs cheaper credit. If interest rates are increased, there will be a direct threat to industrial growth. That means lower interest rates.

I am quite surprised when I saw what this great man has done. Generally a priest does that. He simply followed text book and has left everything to act of god to rectify the situation. Most of the banks are reluctant to implement. This transitional failure will surely create confusion and will never achieve the purpose.

RBI governor’s statement on this move

I am eagerly waiting for rains. (Hoping rains will increase food supplies and production and these supplies will bring down prices and inflation)

His statement Earlier on slow down:

2009 is tough and 2010 will be tougher

A policy maker shall make policy decisions keeping prevailing situation and economic conditions in view. A policy maker work starts by assessing situation and not by christening what situation is.

Metro

As expected Metro is making news. We need to see where will it lead. For the time being I understand it will be purely a railway project not a real estate one. It will take some more time to see whether speculation ghost will raise its ugly head once again

Rupee Symbol – We too

It is a significant development. Much awaited results are out. Mumbai based IITian’s design was approved.

In the international arena, it will give us a chance to stand along with few others. It, in fact, symbolises our policymaker’s vision. Cause it will give us a chance, apart from other benefits, to brand our symbol and promote it in the international financial circle. It will increase trading in our currency and it will also have positive bearing on investment inflows. Domestically, the promotions to familiarize the symbol will be on. With this we have joined in elite club of those countries which have symbol.

The Unicode process has begun; soon this symbol will appear on our mobiles, laptops, conversion tables etc subject to some approvals from Unicode consortium of which India is the member.

The Indian government has categorically declared that it will not print symbol on our currency

Symbol, Plastic currency and what is next?

Recently RBI has called for global tenders to print our currency in plastic. The plastic currency, compared to paper currency, will endure longer and is difficult to counterfeit. Going by pace, one wonders after, symbol and currency, what is next?

The Andhra Pradesh Housing Board (Amendment) Bill, 2010 – Money to Burn

The bill is to facilitate the sale of assets of housing board or to get into Public Private Partnership for the development of lands of Housing Board. The AP Government has failed to introduce the Bill. It is blocked. The opposition was successful. This happens whenever a new radical bill is introduced. Next time, it will silently sail through. The Bill, had it been passed, would have generated money for government to burn.

Now the question is, is it wise to sell assets? Purpose, is the only justification for this kind of act. If assets are sold for genuine reasons, that is to say, for reinvestment or for creation of another asset, then, we can deduce that the sale is justified. But, take a look at our expenditure. You will find that substantial part of our expenditure is in the nature of revenue and going into unproductive areas. It is not creating any assets leave alone productive. Means, we are selling assets to run our routine. One wonders, what happens once you exhaust all your assets.

I presumed assembly is meant for debate – Jaya Prakash Narayan. (Hinting sarcastically that assembly proceedings lack discussion)

Again our self proclaimed intellectual and constant craver, has tried to distinguish himself from other legislatures, by declaring that his ideal world is different and he is totally dissatisfied. The best way to express that dissatisfaction is to stay way from it than sulking and getting suffocated like this. If you are not satisfied with the proceedings, please stay away from it and nobody, in this democracy stops any one from resigning from any post. Will he resign? I say, he wont, cause constant cravers need something to hang on, cause, they want to crave, constantly.

Entry of Foreign Universities – a classic case for Management of Change

Be aware of two room universities – Chukka Ramaiah, popularly known as IIT Ramaiah is an Indian educationist and MLC of Andhra Pradesh, commented, on his return from US, about entry of two room foreign universities

We are all aware that there is a policy shift towards entry of Foreign Universities (FUs). Now FUs are permitted to impart education in India.

The debate is on. Whether it is good? When whole world is praising our intellectuals and our academic system, do we require it? What is lacking in our education system that necessitates our doors to be kept open in the name of globalization? Will it not kill our much prided heritage and culture upon which our unity in diversity rests?

Whenever there is major change in policy, there will be questions and answers. Whether for good or bad, Indian Government took its first cautious step towards it. We call it cautious, because so many strings are attached to it. FUs shall keep huge corpus fund and the operations shall be on strictly non profit basis. Further, non repatriation clause is made applicable to it. That means, they can not take money back to the host country.

So far so good, What is the next step?

Is this first step, is part of the process that is aimed at management of change to differ, divert and dilute the genuine concerns that are expressed in some quarters. Fear, based on past experience and the arm twisting tactics of Foreign players, there is every possibility, that these strings will be silently diluted with out causing much attention. This is latent.

Apart from this, the concerns expressed by Sri IIT Ramaiah, Learned Scholar, that there is a danger that two room universities might step in.

Apart from all this, once the fine print is out, there will be attempts by the intellects, to take advantage of the gray areas that might lurk under the regulations.

By looking at all this, as well as the huge investments that are required by FUs, the initial moves, are they plain and does not require much reading or is it another deliberate attempt to manage change. We need to wait and mmm……………………. see

Andhra Pradesh Industrial Policy - Focus is on SMEs

As expected much awaited Industrial policy 2010-2015 is out. Naturally Government has projected an ambitious figure of Rs 15,000 Crores as investments to flow in annually. Since, SMEs is now a thrust area nationa wide , Whole state policy, as it appears, is hovering around SMEs. IT sector, where we AP is now in fourth place, received enough attention. Aim is to climb up in this rating. In this direction, government wants to constitute a Business Advisory Committee under the Chairmanship of Honble CM. Lets hope it will have best of best brains from the Industry and not to become another political rehabilitation centre filled with sympathizers. Recognition of Tier II and Tier III cities is a very significant development. Increased focus on manufacturing sector, if implemented as planned, would push growth rate to 17% form 12% and generation of employment which is estimated aroung 500000 new jobs in various sectors

Over all, we can say that it is positive and good. It shows that State Government means business.

But what is needed further, apart from having a sound policy, what we need to have, for stable Industrial growth and Investment flows, a congenial industrial environment. It is time now, our political leaders shall question themselves, can they carry their respective agendas with out effecting core economic factors which are vital for State Industrial Growth. Irrespective of their political stand, can they impartially support and give unbiased acceptance to what is good to the state and create an atmosphere that is conducive for growth and investments. Lets hope for the best

Policy document – where is it

We shall be happy, our government website promptly displayed AP state policy. Funny thing is, if we click that link for policy document, a message gets displayed or an press realease not the document

Interest Base Rate – much needed or undue interference

It is a welcome measure.

Earlier in Prime Lending Rate regime, the Banks had freedom to lend either below or above PLR. Now, under base rate regime, the Banks can not lend below base rate. Borrower can compare the rate that is being charged to him with the base rate, and know how bank rates his credit worthiness. Absolute transparency.

The question is, is Banking a business? Is base rate simply declaration of its cost of funds and minimum profits? Since banking is a business deals with risk always, is it not unfair to prevent it to play safe? Cant it lend funds below its cost so that it can lend some of its funds in high risk ventures? Does not it have enough flexibility to construct a portfolio which will have low risk investments to high risk?

Finally we should also understand that it is market which determines the rate of interest. Then economy, inflation so on so forth. Further, if one bank announces, then all others will follow the suit. Will it not lead to under cuts in times of insufficient credit off take?Does not it amount to interfere with one's commercial decisions?

We firmly feel that any move which will interfere with the business will ultimately fail. One should understand now that west is looking at the east and not the other way round. We need to assume leadership and not to have the mindset of the follower.