Committeology in financial sector, a tribute to Jaspal Bhatti

There needs to be a formal study of the art and science of group decision making in the financial sector
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First Published: Tue, Nov 06 2012. 07 01 PM IST
Jaspal Bhatti, one of the few, brilliant political satirists during the Doordarshan days had brought out committee ethos brilliantly in one episode of the immensely popular Flop Show. Photo: HT
Jaspal Bhatti, one of the few, brilliant political satirists during the Doordarshan days had brought out committee ethos brilliantly in one episode of the immensely popular Flop Show. Photo: HT
Updated: Wed, Nov 07 2012. 12 09 PM IST
No, please don’t see the title and rush to the dictionary or Wikipedia, it is not there. If it were to be there, the description would run something like this—“appreciation of the convening of a congregation of individuals, experts or otherwise, preferably a group that has congregated before, for the purpose of deliberating on a subject that has been deliberated upon before, and on which the probability of taking an action in future approaches zero as time approaches infinity. Congregation may also be variously called core committee, task force, work group, standing committee, expert panels and high-level commissions”.
Committees need to be revived periodically because they have a short half-life, i.e., they decay to half their original value within a short period of time. But it also means that as per the laws of nuclear physics, a committee takes infinite time to die.
Committees are necessary. They serve different and useful purposes. In Parliament, committees overcome the lack of skills (and interest) in specialized matters within its members. At the Reserve Bank of India (RBI), they are necessitated either to make controversial decisions democratic or appear so.
But committees only commit and don’t command. Generally, committee members and implementers cater to different constituencies, and a congruence of objectives is unrealistic. Neither is it inappropriate to set up a second committee on the same subject provided the terms of reference are substantially changed. But the financial sector has seen frustratingly repetitious committee formations, leading to a wastage of valuable intellectual time.
A detailed study of committees in the financial sector can be a fascinating exercise. A comprehensive list is hard to compile, because many committees have passed into oblivion. However, the truncated list of 215 committees that this author could compile is illustrative.
As expected, farm credit makes the most frequent appearance. Starting from Gadgil Committee (1969) on priority sector lending (which then meant farm lending), we have had Venkatappaiah (...Rural Credit Review, 1969), Sivaraman (...Credit for Agriculture, 1979), Khusro (...Agricultural Credit..., 1991), Gupta (Agricultural Credit Delivery, 1998), Vyas ( Rural Credit, 2000), Samal (Rural Credit, 2002), Vyas again (Credit...to Agriculture & Related Activities, 2005) and Johl (Assisting Distressed Farmers, 2007). They have indeed achieved a lot: farm credit has expanded by leaps and bounds. But so have farmer suicides.
The nanny state has set up several committees to coach banks on how to do lending properly (and you thought it was the banks’ job to figure that out). Consortium lending itself appears twice (Lakshmi Narayan, 1975 and Shetty, 1993). The initial push given by Tandon (Follow up of bank credit, 1975) and Chore (...Cash Credit System, 1980) was followed by Ojha (Service Area Approach, 1989), Vaz (Working Capital Finance, 1993) and Jilani (Credit Delivery..., 1993). Presumably, and for a change, the government has realised the futility of committees in this area. So it simply sends directives to public sector banks to get back into consortium lending, handhold smaller banks etc.
Lack of understanding of committeology is prevalent in RBI as well. In 2010, there was a Mohanty committee on base rate. Commendably, base rate was implemented in 2010 itself. Now there is a Sinha committee looking into loan pricing as base rate has not worked precisely because of the same reasons for which it was set up. Wait for the next system of benchmark to be put in place and fail.
It is pleasantly surprising that the insurance sector has not adopted a universalized committee approach to decision-making despite being a young sector in the privatised avatar, and hence potentially more prone to controversies. So the government, to avoid a discontinuity in its record, set up four committees in one stroke in early 2012, to look into “growth of ... industry, development of products, issues with the regulator..., and ... improve insurance penetration”. Remarkably, the insurance regulator is missing from these committees!
Contrary to popular perception, the malaise runs deeper than committees just being used for postponing decisions. Somewhere down the line, we have excessively internalised the concept of a 2/3 majority or 51% majority, which subconsciously stepped out of the domain of electoral representation and into executive decision-making.
Jaspal Bhatti, one of the few, brilliant political satirists during the Doordarshan days, is sadly no more. He had brought out committee ethos brilliantly in one episode of the immensely popular Flop Show. Several meetings of the committee fail to achieve anything. When Bhatti, one of the committee members comes out of the last meeting beaming, an expectant reporter thought that a decision has been taken. Bhatti said, yes indeed: The date for the next meeting has been fixed.
The ministry of finance (MoF) needs to learn the art and science of committeology soon, and then apply them. Or else, MoF stands not only for ministry of finance but...multiple organ failure.
Dipankar Choudhury has been a senior research analyst on financial services as well as other sectors at various investment banks, and is currently an independent consultant focusing on banks and financial services.
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First Published: Tue, Nov 06 2012. 07 01 PM IST
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