The failed institutions played a role, too

The failed institutions played a role, too

The Ostrich and Dr Doom" by Nirvikar Singh, Mint, 22 September, was an excellent article. However, these failed institutions did provide credit/liquidity to those sections where your average bank would not have ventured. They did arrange cheaper credit for emerging markets and took exposure on riskier sections of the US mortgage market. In doing that, they did contribute to demand growth in emerging markets. With the failure of aggressive institutions, credit has either simply become unavailable or a lot more expensive for the majority. The lack of liquidity is now ultimately delaying industry capacity expansion and negatively impacting demand.

— Sumit Sharma

In “Is there something wrong with ICICI Bank?", Mint, 22 September, Tamal Bandyopadhyay’s comments on the bank’s different business models are excellent. But the author has not analysed the root cause of the issue. Universally, all financial institutions, including commercial banks, became big through mergers, acquisitions and inorganic growth. They also expanded their asset base ignoring capital adequacy norms. Even assuming such plans have been properly funded, big banks have not been able to fund quality assets, and hence the trouble. It is nothing but lack of opportunities for quality lending. These ideas have been borrowed from the West (particularly the US), and one has seen the outcome in the form of failed big institutions. The US bailout plan amounting to $700 billion will put the US economy into further trouble. Why should the government intervene when the entire US believes “the matter should be left to market forces"?

Small banks in India are doing well even today. But, unfortunately, the banking experts who matter have given the impression that size matters. This is incorrect. It may be true for manufacturing/services, but not the financial sector. It’s simple economics. If you have Rs100 crore, you can lend properly after thorough quality diligence and get quality borrowers. With Rs10,000 crore, you are forced to dilute your appraisal norms and go for second-class borrowing citizens/corporates; else your funds remain idle.

—K.V. Rao

Apropos the editorial “Confusing the Singur issue", Mint, 15 September, I agree that Tata Motors should not be allowed any special treatment about making public the contents of its agreement with the West Bengal government. But is it not Tata Motors’ right to defend its position? For that, if it does not want disclosure of those contents, it is committing no sin.

—Narendra M. Apte

Jaithirth Rao in “School vouchers are ideal for poor", Mint, 19 September, is right. This is the most equitable way. This is also very relevant in the context of corruption that has become an integral part of our life. Our country has never given respect to the profession of teaching, which is most evident from the salaries our teachers get, even up to the level of postgraduate colleges. And yet we expect this profession to deliver to the country a talented, honest, disciplined and cultured generation. Prof. (Amartya) Sen should have looked at, and touched upon, this sad state of affairs and the way we have treated our “gurus". Rao has rightly raised these points in his discussion on incentives.

The other disturbing aspect is that the education sector is being opened up by our policymakers further as a very profitable business venture — without putting any effective quality parameters and monitoring systems in place. The result is that we have all kinds of schools and educational institutions at every corner of the street.

—Tosh K. Toshniwal