How to survive the collapse of a Bank in India

Lakshmi Vilas Bank is the fifth financial firm to collapse in India within the last 30 months. In these five banks, most were sending out message far in advance that they are about to fall. Is there any method for common people to survive in such failures?

Methods or tricks to survive:

Banking is a difficult business. In India it is a more difficult due to corruption and many legal problems. While there is repeated reforms in the recovery part of bad loans, the disbursement of loan is anything but transparent. The Banks have SOP on disbursement of loans but it collapses after every two decades. Last time there was a similar problem in 1996-99.

The high interest rates on credit is only a reflection of this problem of bad loans. The difference of 3-7% between the prime deposit rate and lending rate is unusually high to cover the cost of money wasted on bad loans. But that is another problem. So how does a common person survive such falling banks?

Few Survival tricks:

There are many simple rules which have to be followed. But this guide is for those who have funds below ten million (one Crore) in cash to handle. For sum more than that, these rules may help but may not be sufficient. First is Post Office Bank.

Post Office Bank

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The Prime Minister level summit between India and Luxembourg.

If Luxembourg is compared to with Indian Railways, it would be just one railway station out of the more than seven thousand five hundred of Railway Stations it has. Luxembourg has population of less than 7 lakh, which is the daily traffic on some of the stations of the Indian Railway. But Luxembourg is the second richest country in the word with per capita income of about 80 thousand USD on PPP basis. In terms of territory it is twice the size of tiny state of Goa in India. But despite it’s size, Luxembourg is one of the four Capitals of European Union and is seat of Justice in EU.

So what is so important that in this pandemic, both countries could not postpone the summit and decided to be across the table through the virtual video conference.

Luxembourg on FATF Grey List:

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Tightening noose around political funding by NGOs.

Non Government Organization or NGOs in India are governed by obsolete and opaque Societies Registration Act and therefore abused by all. This includes polititians, on top of all other. Foreign remittance to NGOs is governed by Foreign Contribution Regulation Act. Every NGO has to apply for a licence to get foreign currency for a charitable purpose. NGOs have to file an annual return of expences with the licensing authority. 20000 NGOs failed to comply with this small requirement and therefore their licence was cancelled in last 4 years. In enquiry of several NGOs these were found to be hiring journalists in the name of study and funding protests. Now the Government has decided to tighten noose around these NGOs.

FCRA amendment

The amendment makes Aadhaar (biometric) mandatory for all the office bearers of an NGO seeking foreign donations, prevents transfer of foreign contributions to any other person unless they also possess FCRA certificate, enables the Centre to allow an NGO to surrender its FCRA certificate. It also bars public servants from receiving funds from abroad through the conduit of NGO.

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Arun Shourie: The Inefficient with Integrity.

Arun Shourie in my book is a sincere person. Atleast until he sided with likes of Yashwant Sinha and Prashant Bhushan a known carpet bagger. Shouri is author of many well researched masterpieces. My favourite being Eminent Historians. It is an excellent book about the official historians of Nehru’s India and their methods to spin lies.

Integrity vs. Competence.

Between 1999 to 2004 Arun Shouri was Minister for disinvestment. While his honesty is beyond question, his Ministership raises questions about necessity of competence in governance. Integrity can not be a substitute for wisdom. Shourie all his life had no commercial experience yet he was made to sell government properties at best price!! The result was disaster. While it is a good example to quote that a teetotaller is best bar tender, it is not of universal application. A tippler if he keeps restraint, may prove to be more efficient.

Sale at price below market value.

Recently orders have been passed by a court to register an FIR against Arun Shourie, for his action as a minister in the Vajpayee government.

A special CBI court in Jodhpur has ordered a criminal case against Arun Shourie, former disinvestment secretary Pradeep Baijal and three others for alleged corruption and fraud in a government-run hotel in 2002.

Special CBI Judge Puran Kumar Sharma also ordered that the Laxmi Vilas Palace Hotel in Udaipur be handed over to the state government. The court has given this order in the case of disinvestment of Laxmi Vilas Hotel at a much lower price than the market price. The hotel was earlier run by the Tourism Development Corporation of India, but in 2002 it was sold to Bharat Hotels Limited, which now runs the Lalit Group of Hotels.

The judge passed this order while hearing a CBI closure report in the case of alleged loss of Rs 244 crore to the government from the sale of the hotel. The CBI report stated that there was no evidence to initiate prosecution against the accused in the disinvestment process.

However, the court disagreed with the central agency CBI’s argument in the case and criticized it for presenting a closure report. The court said prima facie it appears that the then minister Arun Shourie and the then secretary Pradeep Baijal misused their positions and caused a loss of Rs 244 crore to the central government in the deal.

The other three accused in the case are Ashish Guha, the managing director of the then investment firm Lazard India Ltd, Kantilal Karamsi Vikamsey, the head of the then valuation firm Kanti Karamsi & Co and the chairman of Bharat Hotels Ltd and Jyotsna Suri. The special court ordered that they be booked under sections 120B (criminal conspiracy) and 420 (cheating) of the Indian Penal Code and section 13 (1) D of the Prevention of Corruption Act.

In other words the caucus of these people manipulated to sell a property worth 250 crores at meagre 7.52 crores.

The court said that accused persons should be summoned through arrest warrant. Also, the court ordered the Udaipur district collector to take possession of the hotel immediately.

As stated earlier Arun Shourie was the Union Minister of Communications, Information Technology and Disinvestment in the then government led by former Prime Minister Atal Bihari Vajpayee during 1999-2004.

CBI had registered an FIR on August 13, 2014, alleging that Baijal misused his official position on the basis of preliminary investigation and criminal conspiracy in the disinvestment of the Lakshmi Vilas Palace Hotel. According to the FIR, the hotel was initially valued at Rs 252 crore. But in the end it was disinvested for Rs 7.52 crore.

Arun Shourie was one of the Ministers in Vajpayee Government who even though was not dishonest brought bad name by all his disinvestment deals. All deals were undervalued. It is a lesson for the present Modi Government which is not going out for out right sale and insted of resorting to disinvestment though offloading of its shareholding in Government Companies. Bharat Dynamics was on such company in which Goverment reduced it’s holding by selling 15% shares therein.

Now Uttar Pradesh strikes a blow to China.

Companies sharing border with India (read China), will no longer participate in the tender bids for contracts of any government project in UP. The state government has asked all departments to stop it.

Who can slap a super power?

China may have notions of being a Super Power but it is being slapped by India and now it’s slapped by most populous State of India. Is this how a super power is treated? China and Pakistan stand in same pariha club.

About Uttar Pradesh.

With population of 220 million and some of the largest projects like metro trains in 5 cities, Ganga Expressway, Ayodhya City Development, Airports at Zevar and Ayodhya, Defence Industrial Estate in Bundelkhand, it is the most happening place in terms of projects and investment running into more than 100 billions.

The state government of Uttar Pradesh has issued an order in this regard. In this, all departments have been asked to take necessary action with regard to prohibiting the involvement of bidders or companies of such countries in government procurement. A letter has been sent to all departments in this regard. This includes PPP projects, state run projects, public sector undertakings and corporations and local bodies projects and government procurement.

Actually, the countries with geographical borders with India are China, Myanmar, Bangladesh, Nepal, Pakistan, Bhutan, Sri Lanka and Nepal etc. Although no country has been named in the order, but considering the current situation and tension on the border, it is believed that this time the Chinese companies will be affected more. 58 Chinese app has already been banned by the Union government.

The central government has issued an order to the UP government to implement the system. Now the state government will create a competent authority. Under this authority companies of the respective countries will have to register here. First, these companies will have to seek political consent from the Ministry of Defense and the Ministry of External Affairs and security related permission from the Ministry of Home Affairs. After this the registration process will start in U.P..

Authority will p the details of how many companies’ applications came, how many were rejected and how many applications were approved. The state government will send the entire report to the cabinet secretary of the central government every third month. Such steps have been taken by the central government to protect national security and the country.