EDITORIAL
What is terrorism?
The day before the joint
strikes by US and Britain against the terrorist camps and
Al Qaida in Afghanistan begun, the UN general assembly
wound up a five-day debate on terrorism. The meeting was
a huge success in attendance and condemnation of the
attacks on America. As many as 167 nations and four
observers participated in the conference, which according
to the UN officials is an unprecedented presence in the
United Nations' history. It was also unanimous in
condemning the attacks on America, which must also be
unprecedented. And, then the meeting broke up, without
any movement on the basic agenda of the meeting, namely,
to frame a definition of what constituted terrorism. As
it is, hardly any body condones 'terrorism'. Even before
the terrorists struck America, terrorism was a 'despised
thing'; everybody rejected it. All nations, all peoples
are against terrorism. Terrorism is a menace, is
unacceptable, is inhuman, and must be wiped out from the
face of the earth. There is no difference of opinion
there. Though there have been muted references to
American involvement in propping terrorism, especially
bin Laden and his gang as a counterpoise to the Russians
presence in Afghanistan, and attempts linking the
Palestinian question with the WTC strike, no body not
even Taliban or Osma have condoned the act.
Of course, that
universality of agreements did not help the 167 nations
that met at UN to evolve a definition of terrorism. And
there lies the rub. Terrorism is all condemnable, but
what is terrorism is not clear. Even the terrorist
organizations like say JEM who wrecked the heinous
massacre at the legislative complex in Srinagar would
condemn terrorism, but do not see their own dastardly
acts as terrorism. It is 'freedom struggle' and so is
every terrorist act all around the world, a 'freedom
struggle'. The first reaction of the Taliban to the US -
British attack was that it was 'an act of terrorism'
against Afghanistan? So what is terrorism? WTC strike or
the US retaliatory attack on Afghanistan? Chechnya is a
terrorist activity according to Russia but a 'freedom
struggle' according to the Chechen activitists. So is the
case with all the terrorism being foisted upon the whole
world. Palestinians and Israelis are each other's
'terrorists'. Musharraf calls the high terrorism in Jammu
and Kashmir 'freedom struggle'. Till the other day USA
was loath to call the Irish rebels in Britain
'terrorists'; one of 'achievements' of Clinton presidency
had been getting the Unionists in Ulster to come to table
with the 'terrorists' of IRA. But then, the American
democracy had been openly chummy with everybody else's
terrorists till the Black Tuesday.
When even a thief does not
call himself a thief would the terrorist call themselves
by the true name? They are 'crusaders of freedoms' and
'fighters' for 'rights and equality'. Far from being
perpetrators of the most heinous crimes on humanity they,
unto themselves, are most righteous, most justified of
all the people. Whether it is Pol Pot or Al-Qaida they
are not terrorists to themselves. In fact they see their
opponents, sometimes even the ordinary folks, as the
'real' terrorists. And, they are ready with point and
precedence to substantiate their claim. There definitely
are historical reasons that have allowed, even
encouraged, use of terror tactics to emphasize if not
actually to enforce rights of people against foreign
usurpers or local despots. Not till very long ago a whole
ideology lived on the 'power' flowing from the 'barrels
of the gun' and called it the most enlightened of
dispensations. And, there were inequalities in the world
that seemed to justify the extremism as being the logical
position for every reasonable person to take. Then a
'freedom fighter' was indistinguishable from what we
would today call a terrorist. Thence stems the
confounding confusion of terrorism and 'freedom
fighters'.
The world where all those
polity examples apply was dominated by despondencies and
colonialism. The right of life was generally accepted as
an inalienable right of a human being and that was all
that a human could lay claim to. Sometimes even this
right was openly denied. Of course, freedom was not
accepted as a 'right '. It certainly was not a legitimate
activity. The world was apportioned into realms and
empires that expected people to believe in a divine right
of the ruler and meekly obey him or her. At other times
the ruler was said to be a gentleman who had the ordained
task of carrying the 'burdens' of the ruled; the subjects
had actually to be grateful than they were ruled and
subjugated. Today's world is vastly different. Freedom is
a right, recognized as something natural to a human
being. The world is not an empire but a comity of nearly
two hundred nations. And, that is a good number
considering that barring the tribal stocks, which are
usually sparse in numbers, there are just a dozen major
races in the world. The freedom struggles of our world
are more often regional or racial intolerances or else
sectarian fanaticisms. More than aspirations it is the
prejudices and bigotries that are inspiring whole
'struggles'. Often these are foreign instigations.
All of them claim a right
to terrorise whole populations to bring about the
political changes they are sold to. That terror is
applied first to the target populations themselves to
silence every opposition to the 'aspiration' and to
arraign the people into a conforming mass. Then, that
terror becomes a tool for the 'fighters' who have
terrorized their whole sects into agreeing to their view
of 'freedom'. Whether it is LTTE in Srilanka or People
War Groups in Bihar or the Al Qaida mashing up the
economic towers of America, the tools as well as the
claims are supremely same. They are also self-righteous
to the extreme. None of them believes that any other
ideology save the one they are professing and propounding
has a right to exist. And they are all busy putting those
fond beliefs into practice with force, violence, with
terrorism. Terrorism is violence, anywhere and
everywhere, the violence that does not respect others'
right to have a say, seeking to force every other opinion
into agreement. Often it does not even respect the right
of other's to live save as bounden slaves of this
terrorizing intolerance, yet the world is steeped in high
uncertainty as to what is terrorism.
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ISI
links with Indian Islamic groups
By
Allabaksh Hyderabadi
Whether we
like it or not, the emergence of Inter
Services Intelligence (ISI) as a
destabilising force in the sub-continent
has literally pitted the Muslims against
other religionists in India. If the
Muslim finds himself willy-nilly at cross
roads today, ISI should feel guilty, not
in a small measure but substantially.
The
question often asked in any discussion on
ISI activities is : Are Indian Muslim
organisations hand in glove with the
Pakistan outfit? Frankly, the question
does lot of disservice to the community,
which is as much a part of this soil as
any one else. It also exposes a naivety
that is willing to be exploited with no
questions asked and no answers obtained.
Home
Minister Lal Kishenchand Advani has not
served his cause and that of the minority
community well by not honouring his own
promise to bring out a white paper on the
ISI activities in the country. Why he had
backed out is not clear. Probably,
security and strategic considerations
came in his way.
Also is
the harsh reality that the official
document could become a reference point
for all discourses and a large number of
prosecution cases. Official machinery, by
its very nature, is not known to come up
with full fail-proof material any time
anywhere on any subject. A subject like
ISI is no exception, more so when its
operations are clandestine and
subversive.
Having
said this let me put in a general
observation. There is no dearth of
Islamic fundamentalist organisations in
our country. These are not the exclusive
preserve of our neighbour and our
neighbour's neighbour. A number of them
are around even before India was
petitioned in 1947 by the departing
Colonialists on the basis of religion,
and Pakistan was carved out as a separate
country.
Since the
time of President Ayub Khan, the ISI has
established close links with some of
these organisations and others engaged in
social and economic uplift of the
Muslims. It exploited the bonds that bind
the people on either side of the border
divide, and in so doing, it ignored the
fact, that its own over arching ambition
has the potential of bringing a bad name
to an entire community and make it
suspect in the eyes of the society.
Like
politicians, religious zealots and their
agents, I think, refuse to look beyond
their nose. Our experience bears this
out.
Jamaat-e-Islami-e-Hind
(JEI-Hind) led by Maulana Muhammad
Sirajul Hassan, All India Milli Council
(AIMC) led by Mukhtar Siddiqui, All India
Jihad Council (AICC) of late Palani Baba
(now led by Ahmed Ali), Tabligh Jamat of
Maulana Ishraul Hassan are among the
prominent Muslims outfits. Some of them
are attracting media attention in recent
days for one obvious reason or the other.
Down south
in Kerala, Abdul Naseer Madani has
floated to new party- People's Democratic
Party (PDP) after his Islamic Sewak Sangh
came under the police lens in the wake of
the agitation against the demolition of
the disputed Babri Masjid-Ramjnam Bhoomi
structure at Ayodhya, the birthplace of
Hindu God, Lord Ram. Ayodhya falls in a
Parliamentary constituency, which has
been regularly electing a rank Communist.
Well, that is the beauty of India. About
it, some other time.
All India
Muslim Federation (AIMF), Muslim United
Front (of Maulvi Abba Ansari). Tamilnadu
Muslim Munnetra Kazhagam (TNMMK) of
Zainful Abedin, and National Development
Front led by E Aboobacker also vive for
front rank honours. So do the NGOs active
among migrant Indian Muslims in the Gulf
countries like People's voice of India,
affilaited to PDP, the Kerala Islamic
Group (KIG), Indian Islamic Association
(IIA) and the Islami Youth Association
(IYA), affiliated to JEI Hind.
Whether we
go by community outlook or by the
official tabs on men and matters, it is
clear that the focus of most Indian
Muslim organisations is a to engage in
political action and to organise the
community to strive for a better
tomorrow. The Muslim voice must be heard
and respected for what it is. On this
score ther is no complaint. Well, yes
these outfits, given their strength,
could have done better. That is beside
the point.
There is
no gain saying that Pakistan is making
conscious efforts through its various
arms and contact in India to over
emphasise the Islamic identity almost to
the point of undermining the community's
commitment to the Indian ethos of which
secularism is the key component. ISI, for
instance, is known to recruit operatives,
not merely errand boys but who can be
entrusted with subversive activities. Its
track record based on published reports
shows that success has remained elusive
except in Jammu and Kashmir, and that in
Kashmir also, it has to depend on
mercenaries more than on the locals.
India's
northeast is the new hunting ground of
the ISI, which is operating through its
wide network in Bangladesh, particularly
the border zones. Illegal bangladeshi
settlers on the Indian side are primarily
targeted for enlistment. And from all
accounts, the list of organisations that
have been promoted and patronized, is,
indeed, large. Some of them are
identified as the Muslim Liberation Army
(MLA), the Muslim Liberation Tigers of
Assam (MLTA), Muslim Volunteer Force
(MVF), Independent Liberation Army of
Assam (ILAA), Islamic Sewak Sangh (ISS),
Islamic Revolutionary Front (IRF) and
Peoples' United Liberation Front (PULF).
Undoubtedly,
these organisations seek to serve the
interests of illegal Bangladeshi settls,
who are Muslims by faith and who always
face the threat of eviction and
deportation.
Foreign
national issue is a sensitive
socio-political problem in the northeast.
In the seventies and eighties, students
of the region, particularly, Assam,
virtually brought life to a halt for days
and months at a stretch demanding a
solution to the issue. The student
leaders became political leaders. They
came to power not once but twice in
general elections. But the issue remained
unresolved. Not a single foreign national
was identified and deported by due
process of law till date.
ISI
intentions are clear, creation of
independent pockets of Bangladesh
migrants in India's northeast. Towards
that end, it is strengthening the armed
capabilities of the migrant militant
groups and is helping them to establish
contact with other insurgent groups,
particularly Nationalist Socialist
Council of Nagaland (NSCN) of Isak Swu-
Muivah group. This group is an old
friend-client of the Pak's subversive
outfit.
Knowledgeable
sources aver that it is the SIMI that has
come to play a key role in furthering the
ISI agenda in the country. SIMI stands
for Students Islamic Movement of India.
It is a well-knit organisation,
financially sound and has wide reach.It
has links with such Pan-Islamic bodies
like World Assembly of Muslim Youth
(linked to Saudi based Rabita) and the
International Islamic Federation of
Students' Organisation (IIFSO). Fraternal
ties exist between SIMI and Bangladesh's
Islami Chaatra Shibir, Pakistan's
militant youth groups like Islami
Jamiat-e-Tulaba (IJT) and Nepal's Islamic
Yuva Sangh (NIYS).
SIMI has
denied the charge that it is in league
with the ISI. But various official
agencies, whose job is to keep a hawkish
eye on ISI, are unwiling to buy the
denial. In fact, they contend that ISI
has been using various fraternal bodies
associated with SIMI as conduits for
sending funds, advice and instruction.
ISI has
also used Saudi Arabia and other Gulf
countries maintaining contacts with SIMI
activists during their regular visits
either for collection of funds or for
Haj.
Another
allegation that has stuck- an allegation
is an allegation unless proved beyond
doubt in a court of law, notwithstanding
the fact hard evidence is something like
a mirage in such cases- is that large
proportion of the funds these overseas
collections are channeled to India
through unofficial channels. The Hawala
route for fund transfer is preserve of
the underworld. ISI has a close nexus
with 'Muslim' elements of the underworld!
Wanted underworld don Dawood is sheltered
in Karachi despite a red corner alert
from Interpol.
Links
between ISI and SIMI came to light during
a 'routine' interrogation of a nabbed
Pakistan intelligence officer Major
Sohali Ahmed. ''Confirmation'' tumbled
out during the interrogation of Tamir
Jamal a former President of SIMI's
Maharashtra unit and Lal Singh of Canada
based International Sikh Youth Federation
(ISYF).
According
to them, ISI finalised in 1992 Plan K-2
to train selected SIMI workers by
Pakistan's Jamaat-e-Islami in Lahore. The
training was to be in martial arts and
handling of arms. On return home, these
trained lot were to become the core group
of trainers for other cadres.The ISI's
capability to exploit any innocuous group
to further its anti-India campaign s best
illustrated by Deendar Anjuman (DA).
Giving a rundow on the outfit, an
official document says the DA is an
obscure organisation till it attacked
churches in Andhra Pradesh and Karnataka.
Why did it
target the symbols of Christianity? To
create tension between Hindus and
Christians, says the document, while
noting that Jamaat-e-Islami (JeI) had
described the DA as an off-shoot of the
Ahmediyas. Why blame the Ahmediyas? JeI
alone should know.
Maulana
Siddiqui Deendar Chanbashweshwra
established Deendar Anjuman in Karnataka
about eighty years ago. Part of the
Siddiqui family migrated to Pakistan in
1947; till the time of the 'attacks on
churches' last August, the DA remained
one of the many leser-known
organisations.
Needless
to say, Pakistan deftly exploited its
position in the Organisation of Islamic
Conference (OIC) and its affiliates over
the years to give an anti-India
orientation to several Indian Muslim
Organisations.It also tried to cash in
one the alleged persecution of Muslims
here in India. ISI on its own and acting
through Pakistan's religious parties did
its utmost to drive a wedge between the
majority and minority communities. The
diabolic plan was tested and refined in
Kashmir to some success. Elsewhere, the
offensive just touched the fringe groups
of misguided elements, as our experience
shows.
-Syndicate
Features
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Vajpayee
is proud of what Omar is doing
From B L
Kak
Mr Omar
Abdullah, Minister of State for External
Affairs, has shot into prominence,
following his all-important meeting with
the envoys from the Arab countries. And
the meeting was followed by the Prime
Minister’s reported remark: "I
am proud of what this boy is doing".
It was
generally known that Mr Omar Abdullah
would not like to be flamboyant like his
father, Dr Farooq Abdullah. Indeed, by
the time he joined the Union Council of
Ministers, Mr Omar Abdullah was described
by some quarters as "one of the best
from his generation".
And as he
engaged himself in the task of learning
more and more without trying to be
restless like his father, he began to
draw attention not only from his Prime
Minister but also from most partners of
the ruling National Democratic Alliance
(NDA). Mr Omar Abdullah has now been
described as "by far the best from
his generation".
He cannot
be faulted for his ambition to be his
father’s successor in Jammu and
Kashmir. He has, at the same time,
briefly explained that his return to his
home State would depend on the placement
of his father on the national scene in
accordance with his (Dr Farooq’s)
wishes and requirements.
Be that as
it may, two occasions have given enough
evidence of Mr Omar Abdullah’s class
and grace under pressure. The first was
the crucial meeting he had with all
envoys from the Arab countries in New
Delhi the other day. At the meeting, he
spoke eloquently and put across
India’s point of view with great
effect.
The
second occasion: His performance at a
press conference after the suicide bomb
attack on the complex of the Jammu and
Kashmir Legislature in Srinagar on
October 1. On this occasion, Mr Omar
Abdullah again was extremely impressive.
It is not easy to impress weather beaten
backs. But Mr Omar Abdullah managed to do
exactly that.
While
there is also much admiration even within
the NDA for the way the young man is
shaping, some critics have begun to float
reports that as the Minister of State for
External Affairs he can fulfil his
"favourite pastime and
recreation" for travelling without
any questions asked.
According
to these critics, Mr Omar Abdullah might
find it difficult to follow his
"special interest" of finding a
long-term solution to the problem of
unemployment in Jammu and Kashmir but he
will be able to present the nationalist
face of Kashmir to the world through his
new portfolio.
Mr Omar
Abdullah cannot be faulted for his
fondness for expensive clothes. His Prime
Minister and Ministerial colleagues are
not bothered by what he wears and how he
eats. Both Mr Atal Behari Vajpayee and
the Minister for External Affairs, Mr
Jaswant Singh, are said to have
appreciated Mr Omar’s handling the
grim Islamic countries with a fair degree
of charm.
Functionaries
in the Prime Minister’s Office have
confirmed that Mr Vajpayee has a
"special fondness" for the
young man (Mr Omar Abdullah). Mr Omar has
accompanied the Prime Minister on several
foreign trips.
As the
Minister of State for External Affairs,
Mr Omar Abdullah has undertaken the task
of tackling the Islamic countries, with
Mr Jaswant Singh overseeing the
all-important USA, China, Russia and
neighbouring countries like Pakistan.
Mr Omar
Abdullah’s biographical sketch,
available in Parliament House, does list
unemployment in Jammu and Kashmir as a
special interest. An erstwhile student of
the exclusive Sydenham College in Mumbai,
he is fond of tennis, squash, swimming
and skiing. He has remained
non-controversial. He is seen by his
Prime Minister and other colleagues in
the BJP-led coalition as a "pleasant
lad".
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Indian
economy at cross roads
By D S Mehta
The terrorist
attacks on September 11 on American people and
retaliation by US will affect the world economy
and put further pressure on Indian economy which
is already at the edge of substantial slowdown.
The present crisis will give rise to oil prices
leading to hike in inflation. It will also affect
our exports and flow of foreign direct investment
affecting, in particular infrastructure projects.
It may be necessary for the government to levy
more taxes, reimpose surcharge and reduce
subsidies to meet the situation.
However even
before the present developments, Indian economy
has been in deep trouble notwithstanding Finance
Minister's repeated claims to the contrary. The
targets set by the Finance Minister in the Budget
2001-2002 have fallen flat. As per present
indications the GDP as well as industrial growth
in the current year may not be more than 4%.
Fiscal deficit may be more than 5.5%.
Dis-investment will be about 20% of the target of
Rs 12,000 crores. Labour reforms promised in the
budget have become a non-starter. Public
investment and FDI are all-time low affecting
infrastructure sector in particular. Unemployment
is loming large. Not only the private sector but
also the Government is busy with ERS, VRS and
golden handshake. Youth, educated and
un-educated, are hunting for jobs without much
success. Reform process has little meaning for
them.
De-regulation of
agriculture sector and downsizing of Government
promises in the Budget are nowhere in sight.
Government revenues may decline by Rs 10,000
crores. International credit rating agencies,
Standard and Poor's and Moodys have downgraded
India. The mega Rs 58,000 crore National Highways
Development Project is three years behind. The
promised new civil aviation, auto and tourism
policies are yet to be announced. Fast track
courts to clear the backlog of cases have not
started functioning. Nearly 3.5 crore cases are
pending and 2.5 lakh under trials in jail. Power
reforms have not taken off. Fifty per cent of
generated power is nt paid for resulting in Rs
15,000 crore annual loss to state electricity
board. PSUs continue to make losses. There is no
long term food management policy as States have
refused to agree to scheme of decentralized food
grain management announced in the Budget.
Series of scams
have taken place during the present Finance
Ministers tennure. The Stock Market has collapsed
under two scams and is now beyond any recovery.
The US-64 bailed out three years ago is again in
the crisis. There is run on Cooperative Banks, in
Gujarat and Andhra Pradesh giving danger signals
to the entire banking sector. Non-performing
assets (NPA) of nationalized banks has touched
over Rs 64,000 crore by March 2001. Even IDBI and
IFCI are in financial trouble. IDBI has
discontinued some schemes and requested RBI to
extend about Rs 15,000 crore loan. Konkan Railway
Corporation has sought bailout from the
Government. With the collapse of UTI, the biggest
mutual fund, other such funds are in total
disarray. The Finance Minister disowning his
responsibility for US-64 crisis on the plea that
UTI is an autonomous body and that the Government
does not interfere in its afairs has shaken the
confidence of investors. They are apprehensive
that the same argument can be used if any
nationalized bank becomes bankrupt. In this
scenario investors do not know where to invest.
The present investment climate affecting which
are already on the decline.
What is the fate
of second generation of reforms? The congress,
the main opposition party and the architect of
econmic liberalization has now taken a complete
U-turn on reforms. The coalition partners in NDA
are taking different stands on reforms. The
coalition partners in NDA are taking different
stands on reforms suiting to their political
agenda. Even BJP is divided and its mentor, RSS
is up in arms against globalization of India's
economy. It would like BJP even to give up power
rather than follow the path of globalization.In
this scenario what is the future economic out
look? What is going to happen to liberalization
and globalization process and flow of investment,
domestic and foreign crucial particularly to
agriuclturue and infrastructure sector ?
Comfortable
foreign exchange reserves, revival of exports and
moderate inflation are only silver linings in
otherwise grim economic situation. The areas of
concern are decline in agriculture sector,
stagnation in industrial growth particularly of
the capital goods sector, decline in domestic and
corporate savings, failure to achieve
dis-investment target, continuing depressed
capital market, fall in public and private
investment, decline in flow of FDI, nil
employment generation, and the middle class
seething with discontent for their losing
life-time savings under stock market and UTI
scams. The Finance Minister reducing interest
rates across the board has further added to their
suffering.
The budget
announced privatization of 27 companies in which
the process of disinvestment is expected be
completed during the course of the year. These
companies include among others VSNL, Air India,
and Maruti Udyog Limited. If Balco experiment is
any indication, the process of privatization as
indicated in the budget may not come through. The
buyer, 'sterlite' has been indicted by SEBI. It
has put a ban on sterlite to raise money from the
capital market. Similarly privatization of Air
India, and other PSUs may not take off. The two
bidders for Air India-Hinduja and Videocon are
under clout. Hindujas are under CBI probe for
their alleged involvement in Bofors. SEBI has put
a ban on Videocon to access capital market. BPL,
potential buyer of equity of VSNL has also been
debarred by SEBI to raise money from Capital
market. Till now not one of 27 PSU has been
privatised. The decision to disinvest all non
strategic PSU a pipe dream.
The Congress party
is on record that it would not support any
proposal of privatization or disinvestment where
the Government equity is less than 51%. Other
opposition parties and even some constituents of
ruling coalition do not endorse privatization.
Differences within BJP on the issue have come to
surface. The opposition of Trade Unions and of
State Governments ruled by opposition parties
will make privatization or disinvestment of PSUs
an extremely difficult task. In the absence of
broad consensus among political parties, on major
economic issues, the reform process have come to
a grinding halt.
Existing
provisions in the Industrial Disputes Act make it
almost impossible for industrial firms to have
any labour flexibility. Chapter VB of the ID. Act
stipulates that specified industrial
establishments must obtain prior approval of the
appropriate government agency for effecting lay
off, retrenchment and closure. The amendments
proposed restrict applicable of provisions of
Chapter VB to industrial establishments employing
more than 1000 workers instead of 100 at present.
Regidities in legislation in contract labour,
inhibit growth in employment in many service
activities. Section 10, of the Act prohibits
contract labour in work/process/operation if the
conditions set therein like perennial nature of
job etc. are fulfilled. The section also allows
the contract labour in prohibited jobs to become
direct employees of the principal employer. To
overcome this difficulty, the FM has proposed to
amend the Act to overcome this difficulty, the FM
has proposed to amend the Act to facilitate
outsourcing of activities without any
restrictions and without differentiating between
core and non-core activities. The changes in ID
Act, and Contract Labour Act may not come through
in view of stiff opposition of Trade Unions and
other political parties. The labour reforms
announced in the budget are unlikely to take off.
The belated and
halfhearted action of SEBI, against stock market
scam players, FIIs, brokers etc. for insider
trading, price rigging etc is a sad commentary on
the functioning of the regulator. The RBI has
failed to exercise any control on cooperative
banks and is passing the buck to the State
Governments. It has failed to enforce and monitor
ceiling on total exposure of banks to stock
market, covering all forms of investment-equity
shares, convertible debentures and units of
equity oriented mutual funds, and on advances
against share and debentures. The Government has
been watching the scams, stock market, US-64 as
silent spectator and treating as acts of God.
The equity market
and savings are key to larger flows of
investment, necessary for higher growth.
Unfortunately none of agencies charged with the
responsibility of overseeing the interest of
investors have learnt any lesson from earlier
scams. Unless there is shake up in the regulating
bodies and enforcement of accountability, the
investors confidence may not return even in
government run financial institutions including
banks
PTI Feature
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Removing
structural bottlenecks in banking
By Dr Navin Chandra Joshi
India's banking
sector is likely to see a major consolidation
among the top 20 banks, leaving around six odd
players over the next few years. A global trend
in this direction has already been in evidence in
the US, Europe and elsewhere. For long it has
been felt in India that there is need to infuse
fresh thinking in the top management of banks for
developing better business strategies and
marketing efforts.
There is also the
need for improving productivity and efficiency of
the financial system. This is imperative as it
would play a key role in the present competitive
environment as the Indian banking system
transcends into the second banking revolution.
The financial sector reforms underway in India,
however, must be seen as a component of the
overall scheme of structural reforms. Despite the
progress made in terms of structural reforms.
Despite the progress made in terms of
geographical and functional coverage, the
financial system ought to emphasise the need for
its viability and more particularly, of the
public sector banks.
The current
scenario of Indian banking is manifest of the
most challenging phase of reconstruction the
whole system is going through. While profit
position has been improving considerably, paving
way to bring about a transformation in their
approach to banking, the presence of private
sector banks has also given a new impetus to them
to compete in 'quality' rather than 'quantity'.
Public sector
banks do have a solid base to build on. In fact,
the rural sector needs to be targeted for
increasing the pace of deposit mobilisation as it
is still insulated from the attractions offered
by other alternative forms of savings and rely
principally on banks. Public sector banks must,
therefore, concentrate on increasing their
activity in the rural areas where there is
virtually no competitionat present. If they do
that, they will be able to preempt any dominance
by private sector banks in future. It is
precisely for this reason that nationalised banks
went in strike against creation of local area
banks of the private sector in rural areas.
The position of
regional rural banks, cooperative banks and such
other peripherals is also quite worrisome. The
accumulated losses of all regional rural banks is
around more than Rs 1,500 crore and these have
been going up from year to year causing
deterioration financial position of RRBs.
As such regulation
of different components of a group by different
regulators requires close coordination among the
regulating agencies. Moreover, in a bank with a
subsidiary for security trading, deposits may be
used for security trading which will expose
depositors to the risks associated with the
security market.
Not only this. The
safety measures such as depositor protection in
the form of deposit insurance, liquidity support
for the bank by central bank, etc. will
indirectly by stretched wider. In the case of
universal banking, possibility of such transfer
of risk from one market segment to the other is
much higher. Therefore, evolution of suitable
institutional structures in the economy becomes a
very crucial factor in designing the regulatory
and supervision system for banking business.
As the evolution
of financial conglomerates is still in initial
stages in our country at present, conflicts in
the system have not taken the centre stage.
however, with the growing competition and
globalisation, diversification of banks in India
will accelerate. It is expected that a modified
universal banking model will ultimately be
evolved in India.
All said and done,
still the important issue is when regulatory
bodies don't regulate, it is not the lack of
regulatory powers which is at the root of
problems of, say, scams. It is simply the case of
impotence amidst power. Therefore, the central
bank of the country has to evolve a system to fix
the accountability of auditors and inspectors for
failure to detect irregularities in time. If bank
supervision has to become credible for the common
man, then a climate has to be bult in which
people know that money with banks is more than
hundred per cent safe.
Unfortunately,
somehow the fact is that despite strict
instructions to desist from window-dressing,
almost all banks indulge in it in their financial
statements. As such, in order to depict the
correct position of financial strength of a bank,
an ombudsman type of body to oversee audit of
banks assumes vital significance. The new audit
body should ensure presentation of a true and
fair balance sheet, disclosing the real
performance of banks. It should also serve as a
watch-dog and expeditiously investigate all cass
of frauds, while devising ways to plug all
loopholes by which frauds are committed. While
the urgency of an audit body for banks, as an
independent institution, appears to be essential
it should be seen that it does not degenerate
into inactivity or casualness. If and when that
happens, there would then be no alternative left
to resurrect India's banking sector except by
privatising all the public sector banks.
Their problems are
inefficient and poor working, narrow margin on
advances, high establishment expenses, mounting
overdues, poor recovery, and above all, the lack
of accountability of those concerned. The major
weakness afflicting the RRBs has been the
continued poor recovery performance of most of
the banks and in the process turning a large
number of their loans into non-performing.
Therefore, every
possible effort needs to be made to recover the
loans from the defaulters, for which the support
of village panchayats may also be elicited. The
writing off loans and entering into compromises
need to be done with lot of care and
circumspection for which the government will have
to be fully accountable.
Now time has come
when banks are to operate like any other
institution where people have access to all types
of information, books and accounts. Shareholders
of the state bank of India, for instance, have
found to their horror that as investors in a
public sector bank governed by its own Act and
the Banking Regulations Act, their share of the
company does not have the some meaning as shares
in other public Limited companies.
World over banks
and banking businesses are subjected to official
regulation and supervision because of the strong
public interest consideration and the potential
danger of systematic risk that may arise on
account of the failure of any one unit. Of late,
bank failure have become quite common, be it
Japan, South Korea, the United Kingdom or any
other developed or developing country. In India,
however, if the Government were not to come to
the rescue of many a public sector bank,
bankruptcy and failure would have been the order
of the day.
It can be said
that with increasing competition facilitated by
liberalisation, the structure of financial
institutions has to change rapidly. Now a variety
of organisational structures ranging from
'universal banking model' to 'group of
subsidiaries with a holding company' are
evolving. each having different implications for
regulation and supervision. Therefore, these have
to be modified to suit the changed ground
realities. In fact, there is need to consolidate
the various levels of supervision in order to
make it quite effective.
The task of
consolidated regulation is complicated by the
multiplicity of regulating agencies. For
instance, in India commercial banks are regulated
by RBI while mutual funds floated by these banks
are under the supervision of Securities and
Exchange Board of India (SEBI).
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