My big lesson from recent years in journalism is that things are never so bad that they cannot get worse. A case in point, the appointment of Shaktikanta Das as governor of the Reserve Bank of India. An event which resulted in this disbelieving little commentary.
To begin with, there is its sheer unprecedented nature. In all the years since Independence, India has never seen something like it. “We have heard of coin shortages but never a cash shortage,” said MS Sriram, visiting faculty at the Indian Institute of Management-Bangalore’s Centre for Public Policy. “I certainly have not in my life. This is new.”
How the shortage played out is odd too. It is acute in some states but not in others. For instance, in Tura, the largest town in Meghalaya’s Garo Hills, an official at the main State Bank of India office, which disburses cash to the bank’s other branches in the region, told Scroll.in that cash reserves had dwindled to almost a fifth of the required amount. “There is pressure from other branches to release money, but we have not been able to give even half of what they have been demanding,” the official said.
The discrepancy is visible within states too. In Maharashtra, Mumbai is fine but Nashik is not. In Tamil Nadu, big banks in Hosur say they are getting all the money they need but their counterparts in surrounding villages say the situation is bad. “We contact our sister branches to see if any of them has surplus cash,” said the manager of a public-sector bank in Belathur, a village about 20 km west of Hosur.
There are other puzzles. The cash squeeze showed up not gradually but suddenly. Reports began coming in from several states from February. If the cash squeeze was only due to a growing mismatch between cash supply and the demands of the growing economy, it should have shown up gradually, experts say.
As a report in Scroll.in noted earlier this month, several theories emerged to explain the shortage, covering the gamut from obvious to plausible to off-the-wall. Shortly afterwards, several Scroll.in reporters fanned out across the country, speaking to people in both cities and villages, to try to identify the genesis of this shortage.
Out today, with my colleagues Abhishek Dey, Mridula Chari, Vinita Govindrajan and Arunabh Saikia, a more deeply reported piece (than the previous one) which seeks to trace this cash squeeze back to its (idiotic) origins. Do read.
atms are again running dry in india. and theories claiming to explain why are doubling every day. out today, a quick report with my colleague rohan which seeks to separate plausible theories from the disingenuous (or just plain stupid) ones.
from the et special issue on modi sarkar completing 100 resplendent days in power, this story on financial inclusion…
Every two years, India’s financial inclusion drive reformats itself into a brand new, entirely unrecognisable avatar. Till about three years ago, it starred banks, the Reserve Bank of India and banking correspondent companies. Then came DBTs and the finance ministry, with its common banking correspondent (BC) auctions. Also came Aadhaar, opening bank accounts and keen to become sole authenticator for all financial transactions. In 2014, the landscape has changed again, partly due to Narendra Modi’s Jan Dhan Yojana.
The new financial inclusion push, Sampoorn Vittiyea Samaveshan, which Prime Minister Narendra Modi is widely expected to unveil on August 15 does not quite have the central bank on its side. Top government sources told ET that the Reserve Bank of India (RBI) was in disagreement with three critical elements of the drive.
it opposed the Rs 5,000 overdraft, the credit guarentee fund, and the aggressive timelines. on all three counts, it was over-ruled. a quick story with my colleague dheeraj tiwari, this one.
early in april, the rbi surprised most financial sector watchers by granting a banking license to bandhan, a microlender with most of its operations in eastern india. in a story out today, my colleague atmadip and i take a closer look at this decision. and say that this is a high stakes experiment — for the rbi, which is looking for fresh ideas on how to deepen financial inclusion; for the mfis, which, given rising competition from banks, mobile companies and banking correspondents, are looking for new ways to survive and grow; and for bandhan itself, which has to pupate into a bank without losing its quick response times, but while guarding against mis-selling of financial products to its vulnerable client-base.
and, after a long time, i write again on india’s search for regulatory mechanism for microfinance.
With the Standing Committee on Finance rejecting the latest avatar of the microfinance bill, old questions about the microfinance sector have resurfaced. Since 2010, when the controversial Andhra Pradesh ordinance made it all but impossible for Microfinance Institutions (MFIs) to operate in their largest market, the industry has been hoping that the passage of the bill would result in the removal of the ordinance.
But now, with the bill going back to the drawing board, says Mathew Titus, the executive director of industry association Sa-Dhan, banks will be nervous about the risk of further state-level interventions…
The other question is on how to regulate MFIs. After the 2010 AP Microfinance crisis, it seemed that a large part of the institutional response would take the form of this Bill — “The Micro Finance Institutions (Development and Regulation) Bill, 2012.” However, with the Standing Committee returning the Bill, that question is wide open again.
also, see these. on the need for the states to have a stay in mfi regulation. another story on the draft bill. on how to regulate mfis – story 1, story 2, story 3. and the need for regulation: story one, story two, story three, story four and story five.