19.01.2011

Politics & the Nation

• Compulsory off for SBI staff to sniff out frauds
• SBI has reportedly told all its officers to take compulsory ‘preventive vigilance leave’ for at least 10 days every financial year. The decision, taken by the high-powered committee of the bank’s board, was communicated to employees a week ago. It follows a string of frauds that have rattled several financial institutions in recent months.
• While reviewing high-value frauds, the committee found they had been perpetrated by officers who had established a reputation for being dedicated and hardworking. These are employees who did not avail of any leave earned by them. The frauds only came to light when such employees went for training or took leave for some other reason.
• There are MNC banks which go a step further. For high-risk activities like bond and foreign currency trading, these banks assign compliance officers to scan the books while the dealer is holidaying.
• MGNREGA and minimum wages
• What is the issue?  Why is there a problem?
• To know it, you must read this news report.  Interesting.
• Some excerpts:
• Centre under pressure to link wages paid under the Mahatma Gandhi National Rural Employment Guarantee Act, of MGNREGA, to minimum wages
• Under the Act, a worker is entitled to . 100 a day for minimum of 100 days in a year.
• Centre concerned that states could raise the minimum wages to some unreasonably high level and enforce it just for MGNREGA
• Govt recently decided to benchmark MGNREGA wages to inflation, which will push up remuneration between 17% and 30%

Finance & Economy

• Why are MFIs being castigated in India and what should they do to avoid the negative press?
• MIFs are being castigated in India because it is only in India that there is competition between government-sponsored and private MFIs, with the government wanting a monopoly. Second, India alone has a tradition of politically-induced default. Third, India alone has rival MFIs giving multiple loans to borrowers, leading to overborrowing and unsustainable debt.
• MFIs should think beyond mere lending to avoid the negative press.  
• First, MFIs must spread activities among several states, and not become dominant in any one state.
• Second and more important, MFIs must start organising women borrowers to stage demonstrations on their behalf when needed. Politically, that alone will take the sting out allegations that they are driving people to suicide.
• Third, they need to get involved in livelihoods development, in providing veterinary services and insurance, and in lowering prices of basic goods for clients by clubbing their orders together, passing on wholesale discounts to clients. Only such activities will convince borrowers that they truly need MFIs, and should demonstrate against state action to hobble these.
• The above prescriptions are an excerpt from today's op-ed by SSA Aiyar.
• Government and regulators are at loggerheads over FSDC role
• Take a look at this news report on the subject.  It is interesting to note the differences.  
• What is the conflict between the government and the regulators?
• Financial sector regulators led primarily by RBI and Sebi want the Financial Stability and Development Council, or FSDC, to focus only on financial stability. Both these regulators do not want the mandate of the council to include financial sector reforms. The government looks at it otherwise.
• Why are the regulators wary of financial sector reforms being part of FSDC's mandate?
• Both RBI and Sebi reckon that bringing the issue of financial sector reforms to the FSDC table runs the risk of impinging on their autonomy. Such reforms should rather be debated and finalised at another forum where all policymakers are represented.
• PSBs will get to sever ties with RRBs
• The government may allow public sector banks to exit from regional rural banks, or RRBs, they sponsored if they are not keen on investing more capital into these dedicated lenders.
• The suggestion to let banks move out of RRBs had come up during deliberations on the report of an expert panel set up to suggest measures to strengthen the rural banks.
• There are 82 RRBs in the country with a network of 15,475 branches.  The country’s largest lender, State Bank of India, alone sponsored 17 RRBs. While the Centre owns 50% stake in an RRB, the sponsoring bank holds 35% and the concerned state government the remaining 15%.
• The Chakrabarty committee has observed in its report that states are also reluctant to infuse more capital in the expansion of RRBs as they are not fetching them good dividends.
• What is a deep discount bond?
• A deep-discount bond is a bond that sells at a discount from the par value. Often, these bonds have very low coupon or interest rates. In some cases, it is zero and also called zero coupon bonds. Such bonds are considered riskier and hence, the discount in order to attract the investor. Though these bonds carry lower coupon rates, they provide call option to investors. This provides liquidity to the bond. In India, the deep-discount bond was first issued by term-lending institutions like IDBI around early 1990s to finance long-term development projects.

Language Lessons

• gravy train: Noun
• Used to refer to a situation in which someone can make a lot of money for very little effort
• at sixes and sevens: Idiom
• In a state of confusion; In a state of dispute or disagreement