FRDI bill may take away all your hard-earned money

blr_p said:
- How many Nationalized Banks have gone bankrupt in last 30yrs? NONE!
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About 19 cooperative banks went bankrupt during 2008 recession. Nationalized banks don't go bankrupt because govt has been injecting money into them despite poor performance Even recently, few thousand crore has been injected govt is supposed to inject 2.1 lac crore more. Note that This money is also technically ours (tax money). But with this bill, the govt wants to shift the burden on to banks themselves and make them self reliant at the expense of depositors funds. Banks like SBI are already irresponsible in their day to day operations. Look at the amount of bad loans they are stacking up. Adani group was recently issued a $1 billion loan for their $16.4 billion mining operation in Australia (which is supposed to have been obtained through large scale corruption) against which there is a lot of public outcry there. What happens if the govt there is forced to give in to the people's demands and stop the operations at some point? Even if nothing like that happens, what are the chances that such loans issued on dubious and controversial projects (maybe under political pressure too) would be recovered back?

I don't trust businesses where making profit does not matter as much as it should. They don't run well and the state of these banks is proof of that. SBI associate banks for instance incurred a loss of 6000 crore through 2017 before getting merged with SBI.

Recently, about 100 crore meant for mid day meal program deposited by govt in SBI was routed to the account of some private builder. SBI did not even catch such a gross irregularity for more than a month till somebody followed up. By that time, the private party had diverted most of the funds to other bank accounts and used it. They recovered only part of the amount and filed cases against the builder.That is negligence to a severe degree.

Now imagine giving such irresponsible entities the authority to use their depositors money without first even trying to bring in some control and accountability.

blr_p said:
- Are Our concerns totally far from real? I sense the usual fear mongering that preys on people's ignorance. How people here qualified to properly interpret the bill ? also NONE!
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Yes, they are well founded. You don't need a doctoral degree in law or economics to understand the bill. Only thing required is high school level basics and good grasp of English. Read the text. Everything that you understand just from interpreting the language used would be valid. It does not matter what the govt originally meant to do or how unlikely is a provision to be used or not based on common sense. Once the bill is passed, anything that can be interpreted from the written text would be valid. All legal loopholes are just "in letter" interpretation of the language used when writing a law. Common sense and logic is irrelevant here. Letter of the law prevails. Once you make a provision for such a thing, it is there to be used or abused

Further if govt had no intent for such a provision to be used in reality, common sense dictates that the bill shouldn't have included such provisions.

Also regarding the "this is just a draft bill" argument, draft bills change when objections are voiced. If nobody objects, there is no debate and the bill can be passed in its original form. Politicians by themselves (even if its the opposition) have no objections to such provisions.They don't keep their black money in banks. It is the common people whose money is usually in banks and it is they who should raise the objections.


blr_p said:
- What's the Government Stake Holding in various Nationalized banks? What Does bankruptcy for Nationalized banks mean? also valid
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Their survival (especially the big ones like SBI) is important to the economy of the country. This is the reason for funding these banks indefinitely. But these are also the banks that politicians can influence and get favors done for their friends. Don't forget that most often than not, the bad loans are all usually result of banks due diligence being road rolled with political pressure. If want a home loan or a business loan from SBI, see how many hoops you have to go though in the name of due diligence. On the other hand, how does Adani group which supposed had 72,000 crore worth of bad loans in 8 different banks (written off) get an additional $1 billion loan (~6400 crore) so easily?

The politicians are the ones ruining the banks, but the banks like SBI have to stand for the sake of the economy which is why tax money has to be used to keep them floating. using tax money like this has its limits. So, there is nothing better than offsetting this burden or part of it to the people.
 
swagatrath said:
@blr_p Thanks for that article link.

Quoting some of it here for the benefit of others..
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Only article 29 & 52 are being highlighted. This is the problem

Can anyone tell us about the rest ? or is everything else in that bill just fine[DOUBLEPOST=1516115482][/DOUBLEPOST]

Watch and comment
 
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sandeepsachin said:
is it time to start pulling out money ? Please guide
@Lord Nemesis @6pack
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Spread it across multiple banks. There is nothing you can do by pulling out all the money. Many types of cash transactions are illegal now. For example, any cash transaction over 2 lac is punishable with a 100% penalty on the receiver.

Also, reduce deposits in bad loan laden nationalized banks and move them to other banks. RBI has been putting restrictions on many such PSU banks as part of PCA (prompt corrective action). While your deposits will be safe for now, things could get inconvenient as there are hints from govt and other sources about shutting down loss incurring branches of these banks. SBI merger itself has left a lot of people in a mess during the transition process. So, any transitions resulting form this could become a bother.

https://economictimes.indiatimes.co...tal-bank-of-commerce/articleshow/60985358.cms

Also, do remember that indiscriminate withdrawals in cash done en-masse can lead to total shutdown of the banks or an even bigger economic turmoil for the country at large. This has happened to ICICI several years bank when news of impact from recession started a panic resulting in en-masse withdrawals. ICICI ended up freezing all cash withdrawals and online transfers temporarily at the time to counter it.

Don't forget that value of a currency derives from common acceptance of its value based on various factors . Currency won't be worth the paper its printed on once that value is tarnished. You only need to look at the 100 trillion dollar notes from Zimbabwe for reference.

https://www.pri.org/stories/2015-06-12/what-can-you-buy-100-trillion-zimbabwe-not-even-candy-bar
 
The problem is that the people handling the money, be it banks or politicians/bureaucrats are corrupt and inefficient.
No matter how much the government cribs about only 3% people paying income tax, the government always earns enough taxes to run and develop this country.

People are saying only these 2 sections of the bill are being highlighted. But what is the problem in that? People are only going to question about the points they have a problem with. It is not my responsibility to go about praising the government for other things they might have corrected with this bill. They already spend enough public money on ads depicting their so called succeses.
Goverments inject money in these banks so that they appear to be safe. Just like a 'making-loss-to-capture-market-share' startup, the business is only safe till the invester keeps pumping in money.
We should have already been furious that our paid taxes, which are supposed to be used to provide services for the masses, are being used to bail out these badly run businesses. But since we didn't care enough to raise our voice at the right time, the government now has the audacity to include clauses where they diminish their responsibilities even further and allow banks to dip their hands further into a tax paying citizen's meagre savings if they again fail.
With the given track record of banks as well as the way our country is entrenched in corruption from head to toe, I don't find it the least bit assumptive for a normal citizen to fear for his hard earned money and raise pertinent questions about the sections in the bill that raise that fear.

I don't need the government to tell me what I should worry about or to try and circumvent from answering by questioning me about the rest of the bill. These are just evasion tactics.
As a country, we decided to be governed by written laws and not spoken laws like in some countries. So, every word that goes into a law has to be taken seriously. The government can keep on arguing that such a situation will never arise, but we have to be proactive by either objecting so that such a law doesn't pass or by finding different solutions to safeguard our money in the future. Like, I have asked above, if the banks are never going to fail publicly (they have already failed multiple times already with the govt infusing money so that they seem to be still standing), then why the need for such a clause in the bill.
P. S. - Currently, I am not much bothered because I owe the bank as much as my deposits with them but there are so many others who are now fearing for their savings.
On another note, I recently came across some contract employees, including my sister, at the Chandigarh Estate Office who haven't been paid since November and won't be till April when the next budget comes. The state has run out of money to pay the salaries. This is what happens when corrupt and inefficient people handle the money for the people. These unpaid employees have now donned the role of agents who get your work done faster so that they can earn some actual money to feed their families.
 
rdst_1 said:
We should have already been furious that our paid taxes, which are supposed to be used to provide services for the masses, are being used to bail out these badly run businesses. But since we didn't care enough to raise our voice at the right time, the government now has the audacity to include clauses where they diminish their responsibilities even further and allow banks to dip their hands further into a tax paying citizen's meagre savings if they again fail.
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You desperately need to watch the video i posted :)

People are saying only these 2 sections of the bill are being highlighted. But what is the problem in that? People are only going to question about the points they have a problem with. It is not my responsibility to go about praising the government for other things they might have corrected with this bill.
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- Fear mongering
- its also very narrow, the full proposal should be evaluated. it should be a fuller story, here we are getting very selective and that too incorrect information
- how it improves things is critical, otherwise why bother. What is it good for.
 
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Will reply in parts as i get time

Lord Nemesis said:
About 19 cooperative banks went bankrupt during 2008 recession. Nationalized banks don't go bankrupt because govt has been injecting money into them despite poor performance Even recently, few thousand crore has been injected govt is supposed to inject 2.1 lac crore more. Note that This money is also technically ours (tax money). But with this bill, the govt wants to shift the burden on to banks themselves and make them self reliant at the expense of depositors funds. Banks like SBI are already irresponsible in their day to day operations. Look at the amount of bad loans they are stacking up. Adani group was recently issued a $1 billion loan for their $16.4 billion mining operation in Australia (which is supposed to have been obtained through large scale corruption) against which there is a lot of public outcry there. What happens if the govt there is forced to give in to the people's demands and stop the operations at some point? Even if nothing like that happens, what are the chances that such loans issued on dubious and controversial projects (maybe under political pressure too) would be recovered back?
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Why have they made those bad loans in the first place ?

I surmise when the G20 FM's met around 2010 the plan was to keep the tap flowing. Otherwise credit would freeze up, confidence would go down and the bad effects of the crisis would spread unnecessarily across the globe. This was the action plan. What this means is loans would be approved. Once people figured out what was going on they went and got loans because they knew chances of getting one were good. This then creates those NPA's. It's the govt that allowed this mess to happen for larger reasons.

Nationalised banks don't go bankrupt as they come with a sovereign guarantee so bail-ins don't apply to them. The bail-ins are for private institutions where justifiably the govt does not want to bail them out and it is here where bail-in applies. Bail-in btw is just one of four ways of dealing with distressed banks yet its made out to be the primary way which is incomplete way of putting it. See the video.
 
I doubt any bank would willingly approve a loan that they cannot recover. Compare the NPA's of private banks with any PSU bank. Banks with highest NPA's are all PSU banks. Private banks are profit centered businesses that are accountable to their investors and are less likely to skip diligence procedures that could land them in such a massive mess. I also doubt the PSU bank troubles are part of a grand plan to recover from recession or that FM's of G20 countries would conclude that indiscriminate lending is a solution to induce confidence in the market.

It is likely that political pressure that is used to road roll all due diligence processes and get loans approved. There was also some article stating that 70% of the bad loans are owed by just 50 entities or so. How does the same entities continue getting new loans despite poor track record of paying back? How does Adani group which has 96,000 crore of bad loans get new loans in such massive amounts around the same period that 72,000 crore of their old loans had to be written off?.

Just look at this data from 2016.

http://www.thehindu.com/business/In...tide-over-bad-loans-crisis/article8573163.ece

Reliance Group : 1,24,956 crore
Essar Group : 1,01,461 crore
Adani group : 96,031 crore
Jaypee Group : 75,163 crore
GMR Group : 47,976 crore

That's just 5 entities owning about half the bad loans in the country. There are also some news items stating that the bad loans of PSU banks constitute 75% of their net worth

The bail-in system proposed in FRDI applies to both private and nationalized banks. The problem of bad loans was created by earlier govt and being continued by present govt. Present govt does not want to continue offsetting this burden from just the tax payer money. It is simply not going to be practical in the long run. They know its going to be an ongoing thing as they keep doing these favors for their business friends and no number of bail-outs is going to be enough. They very much want to make the people take this burden directly at some point of time.
 
Exactly, we've not had this kind of NPA problem before so how did these PSB's suddenly acquire them?

Up to 2008, capital was easy to get and this caused the crisis. But people were still used to getting capital and any interruption causes a shock. Private banks are in the minority, most people use PSB's. It's not about recovering from a recession, there was no recession in India but delaying its onset. It isn't so much indiscriminate lending but definitely not too discriminating.

The big guys always have a grip over govt because they pay for those favours at election time. If the big guys falter then the problem gets compounded for the rest. The point here is all get loans not only the bug guys. So if there are losses they naturally rise to the top because they take out the biggest loans

This i can correlate with construction activity that occurred around me. Houses coming up in front, to the sides and at the back. All in that time frame. Now it is quiet. Prior to 2008 it also was quiet. I have no proof, its just a surmise. i find increasingly i have to do this as the answers are never given on public media only problems are talked about

Bail-in does not apply to nationalised banks and if PSB's is where the majority have theirs savings then they have nothing to worry about like in the past

Watch the video, all is explained. They had to dedicate an entire show to just this question
 
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I don't trust businesses where making profit does not matter as much as it should. They don't run well and the state of these banks is proof of that. SBI associate banks for instance incurred a loss of 6000 crore through 2017 before getting merged with SBI.
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Have to understand why those banks got taken over by Indira in the first place. They refused to move into smaller towns because they saw no profits so the majority of the country had no access to banking services at all. Modi has launched similar schemes with the same social motives. Banking for all.

Yes, they are well founded. You don't need a doctoral degree in law or economics to understand the bill. Only thing required is high school level basics and good grasp of English. Read the text. Everything that you understand just from interpreting the language used would be valid. It does not matter what the govt originally meant to do or how unlikely is a provision to be used or not based on common sense. Once the bill is passed, anything that can be interpreted from the written text would be valid. All legal loopholes are just "in letter" interpretation of the language used when writing a law. Common sense and logic is irrelevant here. Letter of the law prevails. Once you make a provision for such a thing, it is there to be used or abused

Further if govt had no intent for such a provision to be used in reality, common sense dictates that the bill shouldn't have included such provisions.

Also regarding the "this is just a draft bill" argument, draft bills change when objections are voiced. If nobody objects, there is no debate and the bill can be passed in its original form. Politicians by themselves (even if its the opposition) have no objections to such provisions.They don't keep their black money in banks. It is the common people whose money is usually in banks and it is they who should raise the objections.
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yeah, i believe also that one should be able to read and understand but the problem is without understanding the background all you end up with is an incomplete literal interpretation.

See the link posted in post#74

In section 52, see this clause , now were you able to understand that depositors assets would not be used as rebutted in that twitter link.

There are NBFC's now and other institutions besides PSB's this bill is an attempt to streamline all the numerous legislations we have accumulated over the years and have it apply to all these orgs

Draft bills are subject to change and can be amended at any time.
 
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Primary reason is they changed definition of npa. This was done by raghuram rajan. Thats why sudden rise in no. Of npa reporting.
 
blr_p said:
In section 52, see this clause , now were you able to understand that depositors assets would not be used as rebutted in that twitter link.
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Depositors insurance is currently 1 Lac. So bail-in process can use all deposits expect 1 lac. I already mentioned that couple of times in an earlier posts. Nothing new there from the article you linked. The other point is that there is no provision for changing deposit insurance under the bail-in provisions. So while it is common sense to assume that at least 1 lac insurance amount would be left, there is no common sense in assuming that deposit insurance could be higher than what it is. So, if you have 10 lac in deposits, they can take up to 9 lac. They can take less too, but that is not because the depositors insurance is set higher. There is simply no provision to change the 1 lac insurance under this section.

Secondly, under section 29 which deals with the final bankruptcy stuff, the regulatory body has authority to change the liability amount to the depositors. However, they have not set any minimum amount or mentioned that is same or higher than current depositor instance amount.. So it can be set to 2 lac, 5 lac and just as likely set to nil without any legal implications.

As i said, once the bill is passed, every literal interpretation would be legitimate.

Also, as I said before, I am not against the bail-in clause itself, but the fact that the bill is written in a very open ended manner that it can be abused if required. And who knows what other additional amendments would be added to it without public visibility at a later time.

Does it kill them if they are more verbose about it?

- Define the conditions under which a bail-in provision would be evoked.
- Who determines that its necessary and how.
- What is the composition of the regulatory body going to be.
- What is the role of RBI during bail-in or bankruptcy process.
- What is the role of judiciary in the process.
- How are depositors assured that a bank (public or private) is not abusing the provisions.
- What kind of securities would be given in lieu of deposits during bail-in.
- What is the upper threshold on the duration of the security.
- Under what conditions can the regulatory body cancel liability for those securities.

-
 
blr_p said:
Nationalised banks don't go bankrupt as they come with a sovereign guarantee so bail-ins don't apply to them. The bail-ins are for private institutions where justifiably the govt does not want to bail them out and it is here where bail-in applies. Bail-in btw is just one of four ways of dealing with distressed banks yet its made out to be the primary way which is incomplete way of putting it. See the video.
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That is a disturbingly myopic view to look at the issue of NPAs.
The term bail-out may not apply as an economic or lawfully defined term. But what will you call pumping in money to compensate for the NPAs with the money collected through taxes which should have been used instead for running and developing the country.
I would definitely call that a bail-out.
It definitely is an indirect bail-out for the private companies that took those loans and let them turn into NPAs. Why do a few individuals get to play with so much money and not get punished when they end up losing it all?
In what is a landmark judgement, very recently, the supreme court has pierced this corporate viel of Jaypee Group.

There is a dialogue in the movie Dark Knight Rises when the court lets Bruce Wayne keep his mansion despite him becoming bankrupt when Robin exclaims that rich don't even go bankrupt like common people.

The Limited Liability clause, which was recently pierced by the Supreme Court, is the reason behind this seemingly unfair treatment of the people behind the companies which were responsible for these big NPAs.
NPAs are not a new wonder.My father worked for IDBI - Industrial Development Bank of India. This is not to be confused with IDBI Bank with which IDBI was merged later. IDBI was a financial institute just for providing big loans to industries. SIDBI or Small Industries Development Bank of India was formed out of IDBI and has remained largely more successful. Even in the 90s, my father used to tell me about NPAs worth 1600 crores. I specifically remember that because I used to wonder even then how can some person lend such a big amount and just forget about it.
So even if one venture fails, the big industrialists never used to face any consequences because due to political pressure or by greasing the right palms, they used to get these loans written off as losses for the banks while they and their cronies kept enjoying the riches on the behest of the masses.

What Raghuram Rajan did and also why he was suddenly such a pain in the ass for the govt as well as the big industrial houses is because he made it a point to bring these NPAs into the limelight instead of the under the table settlements that they were usually handled as earlier. Of course, common people like me would be furious to see that the same bank charges me such high rates while providing already rich individuals high amount loans at negotiable rates and then fail to recoved them and yet those individuals are seen enjoying their lives and not behind bars. In many NPAs, the govt cronies who work for these individuals use their influence and force banks not to investigate why the loan went bad as well as not allow the banks to go after the collateral that was provided for the loans but instead force the banks to come to a deal with the defaulting party and write off the rest of the amount a losses. In return, the bank officials also got rich because of course no one would do such deals unless they were benefitting from the scenario.
I personally know the IDBI official BK Batra who was chargesheeted and held in custody by CBI in the Vijay Mallya case, as he was the GM in Chandigarh. My father, because he was known for his honesty and being outspoken, was never made a part of the loan department when he was in Chandigarh and always made to handle accounts instead.

Sure, there are genuine cases of NPAs and I have seen a few of those as well while my father was working in the Loan Recovery department later in his career. In one such case, one of the companies with a proven track record suddenly became NPA. My father investigated and found that the only issue was that the company had recently started supplying to goverment bodies which were making late payments and hence he decided that the bank will provide them some more time and the company was able to return back to their normal payment schedule within a few months.
But when a bank official comes across gross misappropriation of funds by the NPA entity, they have to report and file appropriate case of fraud and initiate recovery proceedinfs against the company. And this is where corruption comes into play.

How is the recent case against Jaypee group so important?
The supreme court has pierced the corporate veil of Limited Liabilitt. Again IDBI bank had issued recovery proceedings against a Jaypee Group company which had filed for insolvency for 5xx crores. At the same time Jaypee Infratech owed individual homeowners 25000 crores who were fighting a battle in the consumer courts. According to limited liability clause, the two companies are independent of each other. But the supreme court has stopped those insolvency hearings and attached all assets of the board of Jaypee Group so that those agrieved homeowners can be paid back some amount at least.

If this same approach is applied to all cases of NPAs and banks allowed to sell collaterals or other assets of the people who form the board of the NPA entity, then we will see actual justice being delivered and also a drastic decrease in the actual no of NPAs.

This is the main reason people like me are asking that instead of making laws which make recovering of loaned money from NPAs easier as well as increasing punishment for the parties who are found to be defrauding the system whether it is the industrialist or the erring bank official, why is the law talking about giving even more leeway to the banks to dip in the assets of other customers to deal with NPAs.

I have never heard of a sinking ship being saved by making the hole bigger and that is what is happening, IMO.

I have attached a photo of a notice I found hanging at my local small town branch of SBI today.
They are ready to forego 40% of the amount in an NPA account which has a debt of upto 20L.
This feels like a slap on the face of honest tax, tax paying, EMI paying citizens like me. I can definitely go on paying my EMIs and not splurge on luxuries until my debt is paid, but schemes like these are certainly detrimental to the confidence of people like me who feel that they are being treated unfairly while the dishonest are getting rewarded with discounts.
Such schemes would definitely be right from a business perspective and maybe I would feel differently if I was someone benefiting from such an offer but I like to hold myself to a higher moral standard and certainly wish that such standards were applicable to others as well.
If not, I am afforded the right to at least complain about the different standards as well as make sure that stringent laws are made and applied for everyone.
250092227ccb0f6dc3f4e26fe3e27717.jpg
 
One more thing to add is that most of these corporate groups with huge bad loans are all perceived as highly profitable businesses. Imagine the amount of bonuses that the top executives in these groups must be taking home and all the congratulating and patting on the back after publishing their results. We see headlines like "Reliance Industries posted record profits of 30,000 crore". But what about the liabilities? Its like they don't even consider the money they take as a loan. The banks are just a capital pool for them from which they can take and take and take to build their businesses and earn profits for themselves and investors without ever worrying about ever having to pay back the interest, leave alone the principal. Worst case, they will get the loan written off or offer to pay peanuts like say 500 crore.
 
rdst_1 said:
That is a disturbingly myopic view to look at the issue of NPAs.
The term bail-out may not apply as an economic or lawfully defined term. But what will you call pumping in money to compensate for the NPAs with the money collected through taxes which should have been used instead for running and developing the country.
I would definitely call that a bail-out.
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Bail out ? where is that term to be found in the bill. The term is bail-in. I thought we were discussing the FRDI bill ?

It definitely is an indirect bail-out for the private companies that took those loans and let them turn into NPAs. Why do a few individuals get to play with so much money and not get punished when they end up losing it all?
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You are commingling something else in here. why ?

If debts aren't paid the bank goes under so all depositors with that bank lose. Is this what you want ?

This misperception propagated whether on purpose or not about the FRDI bill that depositors money is being used has been conclusively debunked when it comes to PSB's. Nobody who has their accounts with a PSB need run and withdraw their savings. THIS IS VERY IMPORTANT TO STATE.

You are asking a larger question which has nothing to do with the FRDI bill.

Why are farmer loans forgiven ? Why are electricity companies all over the country not going and cutting off illegal connections.

More to the point why was Lehman bros, allowed to collapse setting off a massive crisis in all countries that were tied to the US, fortunately we weren't one of them. I can tell you had Lehman bros been in India they would not have been allowed to fail. That in itself would have stopped the problem right at the source instead of letting a fire burn out of control and swallow many others

Why were the loans made in the first place. They qualified for them. The loans were made to everyone that qualified big or small. TO make it impossible for the big cats to get loans is to create the exact situation sought to be avoided. Tightening up on capital. No investment, people lose jobs because there is no demand. NOW, we are staring at a recession or worse (who knows) with no end in sight.

What kind of social unrest will that create. Would you prefer that or the present.

Lesser of the two evils. We all keep our money, our lives, but we pay for it in installments over time

look at the debt to GDP ratio of japan or UK. Is it three times or more over ? the ratings companies still consider these countries a good risk.
 
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blr_p said:
You are commingling something else in here. why ?

If debts aren't paid the bank goes under so all depositors with that bank lose. Is this what you want ?
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Nope.
All I would like to happen is that if the govt ends up paying for the debts with our tax money, then at least the people who have lost the money end up losing their other assets as well and not be allowed to hide behind the limited liability clause of company law, especially when fraudulent activities like siphoning off funds to tax havens/ other businesses come into picture.

This misperception propagated whether on purpose or not about the FRDI bill that depositors money is being used has been conclusively debunked when it comes to PSB's. Nobody who has their accounts with a PSB need run and withdraw their savings. THIS IS VERY IMPORTANT TO STATE.
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You might be correct on this but as this article states, people like me find it very difficult to believe that the government and RBI will do right by the people as their track record is very poor. Add to that the insight I have had in the workings of a bank through my father for the past 25 years and you will find it hard to convince me that the government and RBI will let no harm come to me.

http://www.livemint.com/Opinion/sUThI1tG8gY0LRaokkf0RI/Bail-in-two-options-for-the-government.html

You are asking a larger question which has nothing to do with the FRDI bill.

Why are farmer loans forgiven ? Why are electricity companies all over the country not going and cutting off illegal connections.
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You are asking this question to the wrong guy.
I am against all types of subsidies and wrongdoings. The problem is that we don't have the right systems in place to ensure that there will be no need for subsidies. I am just going to start my farming journey and I can guarantee that a farmer can very easily earn a more than respectable income. The only issue is that systems have failed most of our farmers and they themselves can be lazy and not open to learning and experimenting. I have seen and met many farmers and the main difference between a succesful and an unsuccessful farmer is that they treat it like a business and give it their everything to turn as much profit as they can. This is not only true for the 'Internet age' farmer but for many innovative farmers of older generation as well.

I believe that only the people who can do a job efficiently and profitably should be allowed to do it. And this should also be the criteria for providing a loan. You may argue that no one can know that for sure, and I agree. But similarly the same mistake should not be repeated and that person should not be given a loan again for similar purposes, whether he is a farmer or an industrialist.

Why were the loans made in the first place. They qualified for them. The loans were made to everyone that qualified big or small. TO make it impossible for the big cats to get loans is to create the exact situation sought to be avoided. Tightening up on capital. No investment, people lose jobs because there is no demand. NOW, we are staring at a recession or worse (who knows) with no end in sight.

What kind of social unrest will that create. Would you prefer that or the present.
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Ok, so everyone with right business proposal qualifies for a loan the first time. That's definitely true.
However, the disbursal of the loan has lots of checks and balances. The guidelines laid out for the same are very necessary to ensure that the loan is being used for the described expense and not for something else, as was done in the Mallya case. This is what is usually not done properly which leads to the risk associated with recovering the principal increasing manyfold. Same is true whether it is a farmer who takes a KCC and uses it to buy a car instead, or a businessman like Mallya, who siphons it off to offshore accounts in tax havens.
So why are such repeat offenders still given loans especially when the state of their companies at those times are near death.

The thing is that I don't trust the govt or RBI to safeguard my jnterest so I would like that the laws to be enacted don't hold any loophile which could be exploited at a later stage by someone else. Maybe the present govt will standby for the people, but governments change every 5 years while laws are there forever until changed. We never know who might come into power and exploit these loopholes. I would not have any issues if the consent clause is initiated when it comes to FDs.

As for the social unrest question. I would definitely welcome something drastic. We have become very comfortable with the way things are and I hope for a higher order to rise which will hold humanity accountable to higher standards. If that doesn't happen, we won't have any where to run to as we are well on the way to destroying our own habitat.
Yes it is OT, but I have seen first hand what a mess we live in in India where no one cares two bits about long term sustainability of our resources. Industrialization in India is destroying our ecology because people don't care for the future or for our fellow human.
 
blr_p said:
If debts aren't paid the bank goes under so all depositors with that bank lose. Is this what you want ?
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If debts aren't paid, then banks are writing off the loan as a loss, filing the hole using tax payers money and giving them more such loans. Now the govt wants the banks to just use the depositors money to fill such holes. Does that make any sense?

Try defaulting on a loan as an individual and see what happens. The bank will literally send goons after you for collection. Also, what are the chances of getting another loan after defaulting on a loan?

Bail-in is an instrument to save a responsible bank that reached a dire situation due to uncontrollable factors and could bounce back with a helping hand. It's not an instrument to save banks that reached a dire situation due to irresponsible actions and let them continue being irresponsible.


blr_p said:
This misperception propagated whether on purpose or not about the FRDI bill that depositors money is being used has been conclusively debunked when it comes to PSB's. Nobody who has their accounts with a PSB need run and withdraw their savings. THIS IS VERY IMPORTANT TO STATE.
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Bail-in can be used by PSB's. Period. Even the press release that finance ministry made after the controversy just stated that FRDI bill does not mean that govt bail-out is no longer applicable. The PSB's will have both options of bail-in and bail-out. Show me some evidence from the bill section 52 which in very clear terms states that Bail-in is not applicable to PSB's and I would agree with you.

blr_p said:
Why are farmer loans forgiven ?
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Not all farmers loans are forgiven. They are also forgiven when there is a severe uncontrollable situation like drought or foods and the farmer ends up in a position where they cannot feed themselves, leave alone paying a loan and the only way out fo most is committing suicide..It means they are in complete losses. I still don't support it because a lot of misuse happens here too.

You are comparing them to corporate's which are posting profits and where the top executives give themselves fat bonuses. I doubt any of Adami group's top people are on the verge of suicide due to the dire situation that the group is in due to losses and inability to pay loans and their families being hounded by goons .

blr_p said:
Why are electricity companies all over the country not going and cutting off illegal connections.
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Laziness and indifference in many cases. In some cases, fear of being killed. There is not a single reason to not cut illegal connections.

But try not paying a electricity bill for a couple of months and see what happens.

blr_p said:
Why were the loans made in the first place. They qualified for them. The loans were made to everyone that qualified big or small.
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Can you explain how a group like Adani which has 96,000 crore of unrecoverable loans qualify for a new loan? If i take a 10 crore loan and I don't pay even the interest for years, would I be qualify for another loan. I doubt everybody is getting loans or having them waived off or written off using the same rule book.
 
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