Please ask your questions/inquiries here about economics (India or otherwise). I will do my best to answer and also welcome a debate/discussion from fellow economy enthusiasts.
@Nilgiri
Can you tell about the FRDI Bill, its advantages or disadvantages and the controversy over it in a short summary. I'm a bit confusing whos word to take on this issue. If possible can you provide some material. Thank you in advance.
Is it right time to invest in stocks or mutual funds ? I feel market is already very high at current level and may face a downward correction.
I am not an expert and its my feeling without any substantial information to back it up.
Is it right time to invest in stocks or mutual funds ? I feel market is already very high at current level and may face a downward correction.
I am not an expert and its my feeling without any substantial information to back it up.
IPlease wait for the some time till this December. If the nifty break 10200 level then it will go down.
Sir where do you see indian economy by 2030 , could we reach 10 trillion mark by 2030.Please ask your questions/inquiries here about economics (India or otherwise). I will do my best to answer and also welcome a debate/discussion from fellow economy enthusiasts.
Please ask your questions/inquiries here about economics (India or otherwise). I will do my best to answer and also welcome a debate/discussion from fellow economy enthusiasts.
Sir where do you see indian economy by 2030 , could we reach 10 trillion mark by 2030.
Is it right time to invest in stocks or mutual funds ? I feel market is already very high at current level and may face a downward correction.
I am not an expert and its my feeling without any substantial information to back it up.
@Nilgiri
Good to see you here!
I have been thinking a lot about measures of economy. You know the age old debate on which measure of GDP is better. IMHO, GDP PPP expressed in constant USD or an inflation adjusted currency makes most sense because people produce and consume goods and services and not fiscal instruments. But I have heard a lot of booms and baams from Chinese folks in a forum far far away. I know the usage of these terms is a lot political, but if we are measuring the size of economies and especially with a view point of comparing their relative sizes, which measure of economy is most apt?
@Nilgiri
Can you tell about the FRDI Bill, its advantages or disadvantages and the controversy over it in a short summary. I'm a bit confusing whos word to take on this issue. If possible can you provide some material. Thank you in advance.
Sir where do you see indian economy by 2030 , could we reach 10 trillion mark by 2030.
Can you co-relate disparity in wealth distribution among masses vs PPP of state?
Though, Ray has posted an article let me make it short.@Nilgiri
Can you tell about the FRDI Bill, its advantages or disadvantages and the controversy over it in a short summary. I'm a bit confusing whos word to take on this issue. If possible can you provide some material. Thank you in advance.
Welcome @Nilgiri , always a pleasure to meet an expert of economics. I used to be "Abba_Dabba_Jabba" on pdf.
Please shed some light about the recent Buenos Aires WTO summit.
1). WTO no more looks relevant to me, whats your perspective about the recent development since the Doha development ?
2). Do you think India could have given up its position ? If not this year, when will India agree to give up its govt funded Food Security measures.
3). Whats your view about Suresh Prabhu's stand at the summit ?
I didn't write it, but I mostly share the same view on it.
Credits: Shri. Kn Murali, CA
Financial Resolution and Deposit Insurance Bill (FRDI) – Facts, Myths and fallacies
Huge hue and cry is made in social media and many informed people are asking for signature campaign to protect depositors. As usual, uninformed people fabricate the facts and roll out stories in social media, it gets shared and forwarded without any one really understanding the impact.. It has already created a ‘’fear psychosis’’ in the minds of middle class population..
Let me try to explain as much as I know:
Scenario 1 – XYZ private limited company running a factory. The company has taken loan of Rs.1 crore from a bank. 100 people are employed in the factory. The company got into financial mess, the employees are not given salary for the last four months. The bankers seal the plant and proceed to sell assets of the factory. Some other person bids for XYZ P Ltd and the realization is say, Rs.50 lakhs by selling the assets of the bank.
The bankers have to pay the unpaid salaries of the employees first, if anything is left out then only banker can take the money to themselves. For example, unpaid salaries of the employees is Rs.60 lakhs, the banker will have to apportion the entire money to the employees and will have to go high and dry without any recovery. The priority is given for the unpaid salaries of the employees.
Scenario II – Government comes to the rescue of the factory – this is known as ‘’Bail out” provision where there is some help coming from outside – Indian Bank went through this issue when great M Gopalakrishnan was CMD of the bank. Government infused additional capital to rescue the bank. Another good example is Ramesh Ghelli’s Global Trust Bank, Government came to the rescue by requesting Oriental Bank of Commerce to take over the bank with all assets and liabilities – Sathyam Computers is another case where the company got into financial scam, Government intervened and Mahindra took over Satyam.
Scenario III – Instead of rescuing bank through external support, Government can intervene to rescue the factory through the assets owned by XYZ itself (example) – if any rescue effort is made through the internal accruals of XYZ which is known as “Bail in” provision. (This is one section which is hotly debated now, many middle class income group is making a hue and cry)
Myths & Fallacies
After explaining the above three scenarios, let me give another illustration – if there is a bank which goes for financial mess – will the depositors get their money or not?? Way back in 1961, there is a provision in Deposit Insurance and Credit Guarantee Corporation Act – as per the provisions of this law, a depositor has full protection for the deposit of Rs.1 lakh plus interest accrued there on - anyone who has kept deposit above Rs.1 lakh, the Act provides maximum protection for Rs.1 lakh + Interest.
The act came in 1961 and applicable even today – for example a customer has deposited Rs.5 lakhs in a Nationalized Bank, the bank goes for insolvency, the depositor is protected only upto Rs.1 lakh. This is the current provision and please do not be under the impression that entire deposit of Rs.5 lakhs is fully protected. Why are the people raising big hue and cry now when the provision is applicable way back from 1961 onwards??? Neither Arun Jaitley nor NaMo brought anything new at this stage, but a perception is created as if there is a big danger awaiting depositors in future.
Please understand that all banks pay a premium to protect depositors with Deposit Insurance and Credit Guarantee Corporation (managed by Government of India) to offer the protection for Rs.1 lakh.. Though banks pay premium to protect their depositors, there has been no story of any bank fall out in the last 70 years.
Draft FRDI bill was placed before people way back in Sep 2016, people were given 20 days’ time to revert with their views, objections. Cabinet approved the draft bill in June 2017 and placed before Parliament on the last day of Monsoon session of Parliament. Government appointed standing Committee of Joint Parliamentary Committee to look into the bill.. There is no iota of truth that people are not taken into confidence or no opportunity was given to stakeholders to express their views.
The present bill (if passed in the current form) creates new authority called “Financial Resolution Board” which would operate in addition to other regulators like RBI/SEBI/IRDA on this aspect. I do agree that creation of one more authority cannot be solution for the issue of safety of money of the depositors.
What the new Bill provides?
If a bank is likely to become insolvent, the priority of the payment would be in the order of a. Deposit Insurance b. Charges for the Financial Resolution Commission c. Unpaid salaries of the employees for the last 24 months d. Salaries of employees for the next 12 months e. Uninsured deposits f. Unguaranteed Loans etc etc., Effectively, uninsured deposits will come only in the fifth order of preference in the new bill. This is nothing new provision, it is same for the last 56 years.
What can be the solution to the issue of guarantee to depositors?
Current level of insurance of Rs.1 lakh which was fixed 56 years back, can be enhanced to a far higher limit. The current bill does not mention any limit as of now, it is for the Parliamentarians to debate and arrive at… In my view, Government can increase the limit of protection to depositors to Rs.25 lakhs. Even if it means, the depositors have to forego small portion of money from their packets, many middle class investors would not mind paying the premium. This is the most practicable and implementable solution.
Facts
Please do not believe the stories floating in social media and in print media – the bill is still in draft stage, depositors are not put into any new problem, the sword hanging over the customers in the last 56 years continue to remain the same (please note almost 45 years Congress had ruled the Government in this period, P Chidambaram was also Finance Minister for a substantial period, DMK was part of the Government for nearly 15 years during this period)
Please do not believe the stories that the NPAs or Bad debts of banks like Vijay Mallaya or Sahara will come on the shoulders of depositors. (Never Adani and Ambani had defaulted to any bank and it is not appropriate to drag their names just to defame NaMo) – the position of depositors has not changed at all by this bill, only a good effect can come to the depositors by enhancing the value of insurance protection to a far higher level than the current Rs.1 lakh.
Trust the position is made clear – sorry for a long article, it is need of the hour as many dirty stories are going rounds in social media with a sole intention of defaming NaMo before Gujarat Elections.
Any books you guys will recommend for someone who wants to learn economics?