Hope is the currency of faith

In a vast and diverse democracy such as India, I have always believed and said that religion is for the riches since their stomachs are well fed and always full.  Whereas the poor or the “have nots” first worry about earning their livelihood to feed their family.  It is this worry that coerces them to believe in something called religion that is otherwise interpreted and perpetuated by our great scholars.   Many institutions prosper and flourish in the name of religion because of poor and misinformed populates, it is time to put charity and kindness above all religions in the wake of Covid-19.

Just as Government of India was creative and bold enough to draw a one-time dividend from the Reserve Bank of India to fill-in fiscal deficit, I am sure that all the religious or sectoral institutions including temples, mosques, gurudwaras, churches etc. whether registered or not, can be made to participate in a 20-year government bond @ nominal interest from their treasury including gold and other assets.

Nobody knows the worth of the Vatican?  However, based on media reports the Padmanabhaswamy Temple in Thiruvanathapuram, India, is reported to have gold worth US$ 15 billion with one cellar yet to be opened.  Without adding wealth of other known residences of God, if we were to simply multiply this number with 5 i.e. number of major religions in India, we are talking about US$ 75 billion.  Even if we leave behind 25% for their administration and maintenance, we are looking at ~ US$ 55 billion gushing into the economy.  My trustee friends in these religious institutions need not worry since their cash boxes will keep receiving donations from the faithful including myself moment the lockdown eases.

A word of caution that these bonds are a loan to the Government of India (GoI) and not a one-time dividend.  It should be used for productive measures and creation of capital assets rather than for subsidy or direct benefit transfer (DBT).  The monies collected must be used for stimulating the economy, setting up healthcare facilities, decentralize and deconcentrate economic activities from urban to rural areas, build infrastructure, speed up migration of manufacturing facilities from China to India etc, ….perhaps the Economic Advisory Council to the Prime Minister may add more here.  As long as the GDP grows by more than 3% yoy, the GoI should be able to repay these debts easily in a 20-year horizon.  If this were to be achieved, the PM can forego the idea of inheritance tax on us mortals forever; might as well use the inheritance left by the Gods.

I fail to understand why can’t all of humanity rise above religious inhibitions to feed the families just as Sikhism runs langar (community kitchen) or ISKCON runs meal program called Annamrita.  I am sure there are many other similar programs and good work being done elsewhere which I am not aware of.  But there is no point in keeping the assets of these institutions idle when they can be used as community kitchens or make-shift medical facilities or temporary shelter.

As I write and suggest this, there is a deep reservation in my mind due to the powerful lobby that controls such institutions as well as the political ramifications of doing something like this.  As I think more, I am reminded of a similar principle illustrated in a Akshay Kumar / Paresh Rawal Bollywood starrer movie – “OMG” which itself was an adaptation of a Gujarati play called “Kanji virrudh kanji”.  I only hope my cynicism is proved wrong.

Saumil Shah is a Mumbai-based Chartered Accountant. The above are his personal views.

RBI releases operating guidelines for Payments and Small Finance Banks

The Reserve Bank of India has given a fresh nudge to country’s financial inclusion drive by allowing payments banks and small finance banks use digital banking to open bank accounts while streamlining their risk mitigating norms to make the experiment of differentiated banking a robust one. (EconomicTimes)

The central bank has also permitted mobile phone users to open bank accounts with the payments banks promoted by telecom companies seamlessly, provided all the KYC (know your customer) formalities are already met. RBI said that both small finance banks and payments banks can open accounts without a wet signature, relying completely on the digital signatures and electronic verification, which makes on­boarding of customers easy for geographically distant places where opening a physical branch might not be viable.

“Allowing digital signatures for account opening should make the process extremely easy which will help us to get more customers within the banking fold,” said Samit Ghosh, managing director, Ujjivan Financial Services. RBI said that if the KYC done by payments banks promoted by telecom companies such Vodafone, Airtel, Reliance and Idea, is of the same quality as prescribed for a banking company, bank account can be opened without any document. “It may obtain the KYC details from the telecom company,” RBI said in the operating guidelines it issued for payments banks.

It has also set the operating rules for small finance banks, allowing to use interest rate futures for the purpose of proprietary hedging. Payments banks will be allowed to participate in call money and CBLO market as both borrowers and lenders, RBI said. The regulator said both these structures would need to keep a minimum 15% capital adequacy, in line with the rules for non­banking companies, while regular banks are stipulated to keep 9%. Payments banks cannot lend and will not take deposits above Rs 1 lakh, the regulator imposed capital requirement norms on them in line with the Small Finance Banks. For both the category of new banks the minimum capital requirement has been fixed at 15% 

Urjit Patel assumes charge as 24th Governor of the Reserve Bank of India

Dr. Urjit R. Patel has assumed charge as the 24th Governor of the Reserve Bank of India (RBI), effective September 4, after serving as Deputy Governor since January 2013.

He was re-appointed as Deputy Governor on January 11 this year after completion of his first three-year term of office. On August 20, he was named as the new Governor of the RBI for a three-year term. Dr. Patel, an economist, has succeeded Dr. Raghuram G. Rajan, whose three-year term ended yesterday. 

Among his assignments as Deputy Governor, Dr. Patel chaired the Expert Committee to Revise and Strengthen the Monetary Policy Framework. Representing India, he actively participated in steering the signing into force of the inter-governmental treaty and the Inter-Central Bank Agreement (ICBA) among the BRICS nations, which led to the establishment of the Contingent Reserve Arrangement (CRA), a swap line framework among the central banks of these countries.

Prior to joining the RBI as Deputy Governor, Dr. Patel was Adviser (Energy & Infrastructure), The Boston Consulting Group. Born on October 28, 1963, he is a Ph.D. (Economics) from Yale University (1990) and M. Phil. from Oxford (1986). He has been a non-resident Senior Fellow, The Brookings Institution since 2009. 

Dr. Patel was with International Monetary Fund (IMF) between 1990 and 1995 and worked on the U.S., India, Bahamas and Myanmar desks. He was on deputation (1996-1997) from the IMF to the Reserve Bank of India and provided advice on development of the debt market, banking sector reforms, pension fund reforms, real exchange rate targeting and evolution of the foreign exchange market.  He was a consultant (1998-2001) to the Ministry of Finance, Department of Economic Affairs, New Delhi.

Reserve Bank of India to infuse US$1500M liquidity via OMO

The Reserve Bank of India today said it will buy government securities worth Rs 10,000 crore (US$ 1500 Million) under the open market operations (OMOs) on June 20 to infuse liquidity into the system.

“Based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations for an aggregate amount of Rs 100 billion on June 20, 2016”, the central bank said a statement. As part of the OMOs, RBI will purchase government securities maturing in 2020 (bearing interest rate of 8.27 per cent), 2024 (8.40 per cent), 2027 (8.24 per cent), 2030 (7.88 per cent) and 2032 (8.32 per cent). There is an overall aggregate ceiling of Rs 100 billion for all the securities in the basket put together, RBI added. OMOs are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. 

If there is excess liquidity, RBI resorts to sale of securities and sucks out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing liquidity into the market.