When times are right, wisdom comes from the most unexpected of places. This time it is Allahabad High Court. Inspite of being overloaded with cases, a smart judge asked very pertinent questions.
How do all the people brandishing all kinds of weapons on social media – get access to them. Who gives them licenses ? Where do they buy the guns from ? How do these guns get imported ?
The start point of reform is someone who churns the pot. And why would anyone do that ? Take banking for example. Anyone with an understanding of finance and governance will know that something is horribly wrong with Indian banking. But why would someone take the trouble of doing so. Banks have the ability to hurt. And big banks have the ability to harm. Media will never cover consumer banks because they are large advertisers. The regulator is scared of market panic so they try to suppress bad news hoping to break it slowly.
But unless someone takes the trouble of churning the pot – no change will ever happen. Cartels will get stronger. And dominant. And this will lead to market failure. This will lead to monopolies and market abuse.
Whether it is microfinace and rural banking or mainstream banking or project finance. The regulated entities are not meant to be money lenders. They are licensed to collect deposits so that savings can be directed to achieve national goals.
Let me give you an example.
Dacoits have a very profitable business. Other than guns and ammunition, they require very little capital goods or raw materials. There may be very little default if they are not caught. If they flourish – then they will contest elections and become even more prosperous. This will get the bank even more deposits and muscle power to recover their loans. It will even get them suitable policy changes. And get them protection from any kind of legal issues. Judges will be scared to pass any judgement against them.
Is this bank good for India ?
It will have zero NPA, high profitability, excellent regulator support.
This is what will happen if the Citi HDFC Axis Cibil cartel is not defanged. We need to understand what we expect from a bank.
Good banking is about national progress. Not about banking profits at the cost of socio economic progress.
Stock market valuations be damned.
