An Informal Presidential System Without Requisite Checks and Balances

Whenever a strong leader makes it to the top, her / his followers raise a demand for the Presidential system of Government.  It happened in Indira Gandhi's time and we have heard the voices in the current times too.

What has happened in reality is that we are already into a semi-Presidential system.  Do you say how?  Well, now every political party requires not only a symbol but also a face, a face for the topmost position if it gets a majority.  It is this face that does most of the campaigning, the actual candidates from different constituencies being of little consequence.  If there is resentment in a some constituencies agaist the local candidate on account of his being corrupt or a known criminal, the voters are plainly told that you are NOT voting for that candidate but for "the face:"  That the candidates are merely hands, mere instruments, in the hands of the face which is the seat of the brain too that commands these mere limbs.

A reaffirmation of faith in the true democratic principles is heard only when the face is uncertain of attracting the masses at the state or national level, as the case may be.  In such a case the concerned party will say that a person will be chosen for the top position in a democratic manner by the elected representatives and that the electorate should vote on the basis of policies and the manifesto and not personalities.  Otherwise as we said, they plead for one country one leader or somethig to the same effect.

In this day of strong leaders, the semi-presidential system is doing harm to the system which was not designed for this form of government.  As most of the legislators owe their victory to a single person and hence have little voice of their own, the whole system becomes a hostage to the strong leader.  This further fuels this person's ambitions for consolidating his hold and this leads to a corrosive approach to the other counterbalancing players and institutions in the system such as judiciary or media etc.  This would not happen if the person at the top felt that he didn't own the legislators but owed his position to them.  And in this case, the legislators will exercise the first level of control on the ambitions of the person at the top and keep it from trying to subjugate all checks and balances.

If we see merit in having a strong leader then we should also consider suitably modifying the Constitution to implement checks and balances that meet the requirements of a Presidential form of government.  Else we might end up having worst of both the worlds.

Power & Privacy

Human society survives on pretenses, on keeping up the appearances.  Both of these rely on privacy, on being able to hide something from your counterpart in an interaction, sometimes the world at large. We cover our body, cover our odors and cover our thoughts, all to maintain privacy and keep up the appearances. Children find it bewildering when we badmouth guests after having shown great bonhomie during their presence.  Only as adults do they realize that the first is important for sustaining the fabric of the society and the power relationships therein and the subsequent frank expressions just underscore the intimate relationship between parents and children that doesn't demand much privacy.

The level of privacy and pretenses required between two individuals or two groups of individuals or an individual and a group, is directly proportional to the Power Potential (PP,)  The power potential is the difference between power wielded by the two entities in the society or in the transaction at hand.  Need for privacy and pretenses diminishes to the extent the relationship is based on love and not power.  And the reverse is equally true.

This is underscored by an incident in Ram Katha.  When Ram and Lakshman were wandering through the forest looking for Sita, Sugriva was scared to see them coming.  He sent Hanuman as an emissary.  Hanuman disguised himself as a Brahmin, for he too was not sure of who these two prince like youth were.  Once Hanuman learns of their identity, he feels an immense love towards the Lord and that makes him appear in his natural form and the disguise falls off! "अस कहि परेउ चरन अकुलाई। निज तनु प्रगटि प्रीति उर छाई॥"

This being the case, we will agree that the highest PP is to be found in the interactions between the government and a common citizen.  Governments adopt a loving attitude towards their subjects in mass communications and advertisements just to distract them from the real dire nature of the relationship.

All status symbols and symbols of authority, be it the dress / uniform worn by you, or the position held by you, or the size of the office occupied by you, automatically bring the guards up in a counterparty that finds the PP high.  The spontaneity is gone and all interactions are carefully guarded.  This helps the weaker party avoids a confrontation and consequent damage.  But it also becomes a handicap for the person with higher PP as he is not able to gauge his subjects' true feelings.  This is a big handicap for a leader in a democratic setup. For that matter, even monarchs are afraid of a revolt by disgruntled subjects.

Hence the need for intelligence units that can gauge the mood of the public and inform the elected leader or the monarch.  The agents from the Intelligence unit do so by disguising themselves or planting moles to participate in group conversations as a peer keeping PP zero.  (Though it may be noted that human intelligence agencies are not really infallible as was seen in the fabled case of Indira Gandhi ordering elections on the basis of intelligence reports.)

If this intelligence gathering becomes more granular and invasive, it can lead to an Orwellian situation, but is less of a personal threat if only metadata is collected.  The metadata still gives the rulers the political picture to help them influence the voters through (mis)communication or even coercion.  Coercion was visible in the last Parliamentary elections when losing parties that had a hold on the local bodies made citizens suffer for water or other necessities as a punishment.

With the great strides in the world of computing, more reliable intelligence through Big Data and Artificial Intelligence is becoming a reality that can take over the intelligence functions from a human team.  Technology has already taken over many jobs and is now poised to take over the intelligence job too, at least for that section of the public that  actively vents its thoughts and feelings on social media.  With the powerful computing tools available today it is possible to generate a statistical geographical political profile of the populace or even track down individuals harboring certain political inclinations.  All that you need is access to the content created by the surveyed populace on the social media, by hook or by crook and a powerful AI engine to recognize the patterns.  This, of course, leaves out the not so small numbers who do not have access to or do not use social media.  This also explains why the opinion of the middle class can be molded rather easily in this manner and the reason for rushing to the likes of Cambridge Analytica.

Further, what Cambridge Analytica is doing to your posts to distill information about psyche and political inclinations, Aadhaar is attempting to do to your financial data by getting itself embedded in all your accounts and financial statements.  The complexity of tax regulations adds to a citizen's worries about such massive invasion of his financial data.  If BTT (click here to read) were implemented, ordinary citizens will not feel so threatened by this invasion for tax compliance will be automatic.  Keeping your laws complex and then snooping on the subjects is a sure way to threaten, torment and manipulate them.

And hence, it is no surprise that an ordinary citizen feels very threatened with the current developements.  This is why privacy has to be taken seriously.  Though, those like Nirav Modi, who feel that the PP is not too high, may not feel threatened by the system at all.  They even dare to threaten back.  Perhaps they have information on the ruling class that comes handy to them.

It is interesting to note that even governments with all their power need privacy from their citizens.  They achieve this through an Official Secrecy Act.  And not all guarded information relates to external threats.  And this is the reason that while citizens need privacy for them, they would like to weaken the privacy enjoyed by the Government, through tools like RTI.

Privacy is the cushion that powerless citizens have against all powerful governments.  If it is violated, the power wielded by the government goes up further and impacts are much harder on a targeted citizens.  It can lead to an Orwellian society.

A common citizen having little powers and limited means of exercising them therefore needs twofold protection.  One is right to privacy (from government) and right to information (to dilute the power added by the govt through Official Secrets.)

It is time we learnt from Europe and enacted Privacy Laws and strengthened RTI framework in India.

Drowning in Poop!

As part of Clean India drive, lots of efforts are being devoted to prevent open defecation and urination by citizens who sometimes do so because of deep aversion to defecating inside their homes and sometimes, especially in urban areas, for want of a proper toilet.  The campaign is indeed showing results and yet cities are drowning in poop, i.e., animal poop.

I believe it would be very difficult to find a city where you can drive, say, 20 kms without your tyres picking up cow dung or some other animal poop.  Same applies to walking.  Your shoes are bound to pick up excreta of one variety or another.  This, perhaps, is the reason that people normally take their shoes off before entering a home.

Where does all this poop come from?  Our cities are infested with stray animals of a large variety.  You will find cows and bulls.  You will find donkeys, mules, and pigs.  Monkeys have added further variety to the animal kingdoms interspersed throughout our cities.  Dogs are of two varieties, stray and domestic with the former outnumbering the latter.  Cats mostly are stray ones.  To be fair, I must add that pigs while contributing to the menace also help in containing it to some extent!

When I visited the USA for the first time, I was surprised by the lack of boundaries in most homes. Also most homes are built out of wood as the primary building material.  My first reaction was, "OMG! If they had stray bulls of the Lucknow variety, those houses will get razed to the ground in no time."

The total absence of animal poop on the streets in the towns and cities of the developed world is not entirely due to absence of animals.  They do have domesticated ones, especially dogs, in large numbers.  However the owners pick up after their pets.  Plastic bags for the purpose as well as covered disposal bins are readily available at most public places where animals are allowed.

Back home here, if you were to ask a dog owner to clean up after his dear pet, he may not actually murder you but the murderous rage on his face will be unmistakable.  Once he has managed to contain that rage, the standard reply would be, "And how about all the droppings of stray dogs here?  Will you pick it up?"

By the way, dogs are nice animals and quite amenable to training.  However it is surprising that we have thus far failed to toilet train them.  Naturally it will be vastly more difficult to train the others like bulls.  But the menace of animal poop can be resolved only in two ways. We either remove all stray cattle from human settlements or toilet train them and build toilets especially designed for them.

Any other suggestions?

Agra Visit (IV)

Taj Mahal
(Continued from Part III of this post series)

It was a Monday and the Christmas day.  We got up very early in the morning, got ready and had our breakfast at the hotel.  The idea was to reach the Taj Mahal before 8 am.  We were told that the queue grows exponentially after that time.  Our Hotel was only about a kilometer from the East Gate and the car dropped us midway from where we had to walk down.

The East Gate, we were told is the best to enter the monument and is called by some as the VIP gate.  There are two other gates, West and South.  We noticed some Bharatpur style rickshaws (see the previous post) ferrying tourists from the parking lot to the Gate, but chose to walk down.

To our surprise the queue was already almost quarter of a kilometer long when we reached the gate.  We noticed a separate queue for ladies.  It was serpentine bending back on itself several times, while the queue for men was straight.  This gave us an impression that perhaps the ladies' queue was shorter and we asked the ladies to wait on some chairs lying in the lane and to join their queue a little later.

The queue moved quite slowly. Our spirits further sagged when the person behind us narrated the story of his visit the previous day.  He had had to return his tickets after a long long wait in the queue.  As the queue kept growing, we noticed some commotion ahead of us.  It was on account of people trying to jump the queue.

Then it occurred to us that we had the e-tickets only on one phone and we needed to put it on one more phone as the ladies will be in a separate queue.  It seems that they have jammers installed in that area and internet was not working on any of our phones.  It took many attempts to transfer the file through Bluetooth, but we finally did succeed.  And the ladies joined their queue as we approached it.

As we approached the gate, queue jumping was becoming all too frequent. A couple of policemen standing nearby paid no attention to the scuffles and we had to fend off the intruders in our vicinity ourselves as well as we could. My elder grandson remarked that in the USA one can be tasered by the police for such indiscipline.

It took two full hours to enter and clear the security check at the East Gate and then nearly another hour for ladies to join us because of our miscalculation of the length of the serpentine ladies' queue.  From their accounts it seemed that queue jumping was even more rampant in the ladies section.

The main entrance of the Taj is opposite the South Gate.  The three gates open into a compound in which the missing North Gate forms the entrance to the monument.  As you enter the main gate, there is a long verandah to either side of it (with a paid and well maintained toilet at the end of the right wing.)

The view of Taj as you enter is breathtaking and mesmerizing.  Though when you finally get up-close, you the signs of ageing become all too apparent.  But from afar, its beauty does cast a spell on the visitor.

Once inside, you are most likely to be accosted by, no, not a guide, but a professional photographer.  We engaged one of them, and he turned out to be a good choice.  Because of the huge crowds, getting a time slot on the benches best known for photos with Taj in the background is not an easy task.  Our photographer was not only good in his profession but also quite persuasive and aggressive when it came to getting our place in the queue and enforcing it.  After a rather drawn out photo session, he finally gave us the address of a shop beyond the South Gate from where to collect the deliverables.

The photographer also played a guide to us when asked about the two symmetrical red buildings flanking the Taj.  He told us that one was a mosque and the other a guest house.

After the photo session, we joined another queue for visiting the main building and the tombs within.  The queue was gargantuan and went around the Taj twice, once on the lower floor and then on the upper floor where you see the graves.  (Some say that the real graves are on the lower floor and the ones on the upper floor are merely a replica for visitors.)

The queue was long and queue jumpers exasperating.  Some did it brazenly, some on the sly, some by slipping a lie.  Some were aggressive while jumping the queue while others were jovial.  And the offenders ranged from 8 year old kids to very senior citizens!  As we completed the circle on the lower floor, and climbed the stairs to the upper floor, we discovered that we had to go around the building once again.  The high value ticket holders were allowed to go straight skipping the whole serpentine queue.  Though I must admit that going around the building on the two floors did give us an opportunity to observe it in great detail, which many of the high value ticket holders chose to do later on their own.  We also got to see repairs being carried out by artisans.

From up close on the upper floor, you notice the cracks and discoloration in the marble at several places.  As I said earlier, these signs of ageing are visible only from up-close.  The marble tiles on the terrace on the upper floor are in bad shape and need replacement at several places.

I did not mention earlier that before entering the main building, the Taj, you have to either deposit your shoes in safe custody or have to carry shoe covers.  The covers are complimentary with high-value tickets.  The normal ticket holders have an option to buy it from many vendors while waiting in the queue outside the main gate.  We had purchased six pairs for ourselves and many others too had done so.  However, these covers are so bad and flimsy that they are reduced to tatters by the time you go around the building in the queue.  Many had discarded the covers on the terrace itself giving it a shabby look.  Those who were more thoughtful were given an option to dispose it off in a receptacle at the exit from the main building.

We were tired and it was afternoon by the time we exited.  My son went to the south gate to collect the photographs, and the rest of us exited from the East Gate.  Across the road there was a shop selling memorabilia with a tea shop attached to it.  We had samosas and tea and then did some shopping there.  While doing so we discovered that prices paid by our group for some items at Fatehpur Sikri were a few times the price at which the shop offered it!

We walked back down to the car parking and started on our journey back to Lucknow.

PS: While purchasing the tickets online, we were under the impression that the high-value tickets were only for foreigners because that is what the website said.  A high value ticket costs ₹1000 as against ₹40 for normal tickets.  After the long queues that we faced, we made inquiries and were told that the high-value ticket can be purchased by anyone willing to shell out the prescribed amount.  It may be advisable to go for the high-value tickets if you are not at the peak of fitness or don't have the whole day to spend at the Taj.  Though, with the high-value ticket you do miss witnessing the funny, infuriating, innovative and in-your-face styles of jumping a queue.  Also, many 1K ticket holders do take their time going round the monument afterwards convincing the low-value queued up visitors that they are not jumping the queue.  This is something that the low-value ticket holders compulsorily do.  The high-ticket buyers also get complementary shoe covers, a bottle of water and free access to the Public Toilet.

Agra Visit (III)

Bharatpur Bird Sanctuary:
(Continued from Part II of this post series)


This photo of Keoladeo National Park is courtesy of TripAdvisor

Though the name Bharatpur Bird Sanctuary lingers on, the national park has now been named "Keoladeo National Park (KNP.)"  This did initially confuse me as I was looking for a signage with the old name.

KNP is about 25 kms from Fatehpur Sikri.  The road is good and we reached the park in time, about 2 hours before the scheduled closure.  My son joined the ticket queue while I looked around and made inquiries.  The sanctuary gate is about 1.5 kms away from the ticketing gate.  Private vehicles are not allowed beyond the ticketing gate.  There is a Rajasthan Tourism Hotel just outside the sanctuary gate and the guests may drive down to the Lodge.

As our party was tired because of the Fatehpur Sikri tour, walking down to the sanctuary was ruled out.  There was a cycle rental but they had run out of bicycles.  The only other option was to hire rickshaws at ₹150 per hour and the minimum estimated time for a quick visit was 2 hours.  As there were six of us, we had to hire 3 rickshaws as each is designed to seat no more than 2 persons.  A few guides were available and if we hired one, naturally yet another rickshaw will be needed for this person.  As we did not have much time at our disposal, we hired just three rickshaws and pushed off without further haggling.  Other tourists too were doing the same.

The road was bad and the rickshaw-pullers did have a haggard look and they kept pulling the rickshaw instead of pedalling.  Two of the elder pullers were talkative while the third, a young lad, was the quiet type.  On the way the rickshaw pullers did stop a few times even before the park entrance and pointed out to some local looking birds.  One of them described them as migrants from Bangladesh, while the other said it was a local bird.  The first one nodded in agreement and added that the bird had settled down in this area a long time ago.  They also showed us a few peacocks roaming around a Hanuman Temple close to the road.

Though there was no mention of this mode of transport at the entrance, on our way we did see a battery powered car carrying a few passengers.  Upon inquiry, the rickshaw pullers said that it was meant only for VIP visitors.  Later, we also saw a vehicle inside the park belonging to some government official.  Power does have its perquisites!  One or two private cars too were seen on the road to the park entrance.  We were told that they belonged to guests staying at the Rajasthan Tourism Bungalow and will not be allowed to enter the park.

A little before the main entrance lies a museum named after famous ornithologist Dr Salim Ali.  The rickshaw pullers stopped there and encouraged us to spend some time at the museum.  They particularly talked about a statue of a bird that is studded with Swarovski crystals worth several million rupees.  The museum was good, but there was no staff around to greet and brief the visitors and we exited rather quickly apparently to the chagrin of the rickshaw pullers.

It was almost 45 minutes by the time we entered the Park. Once inside, the change in the landscape was noticeable.  We were in the wetlands for which this park is known.  We, along with other rickshaws riding visitors, did stop over every 50 meters or so to look at a bird or other wild animals like deer, jackals, bulls et al.  At our fourth or fifth stop and just as we were starting to feel that the pains we had taken to visit the park were worthwhile, one of the rickshaw pullers informed us that the first hour of hire was about to be over.  He also cautioned us that if we go farther, we might cross the two hour mark indicated by us and will have to shell out another ₹150 per rickshaw.  I think that similar caution was sounded by other rickshaw pullers too, because most of the rickshaws turned back from that point.  Another consideration was that the sun was also about to set and the gates were to be closed at sunset.

On the way back the rickshaw pullers seemed to undergo a sudden transformation!  They lost their perpetually tired look and started pedalling vigorously instead of pulling the rickshaw.  We reached the main entrance in much less than an hour!  Had they displayed the same energy on their way to the park, we would easily have got another quarter of an hour to spend in the wetlands.
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As we started back for Agra, we requested the driver to stop over for a cup of tea.  His reply got us much worried.  He said that it would be advisable to stop only after we had crossed back into the state of UP.  The reason given by him was as follows.  The taxi was registered in UP and had an All India Permit.  Yet, according to the information given by the driver, we were technically required to pay a fee of close to ₹1000 for entering Rajasthan state.  As it had not been paid, we were liable to pay 10 times by way of fine if challenged by a policeman.  We cursed him for not giving this information to us earlier.  However we were into UP pretty soon and could breathe easy and enjoy our tea.

The lessons learnt are as follows:

• If you plan to visit Keoladeo National Park, spare one whole day for it and stay at the Rajasthan tourism Bungalow.  The Bungalow, as mentioned earlier, is just outside the main entrance to the Park.
• If your taxi does not have a Rajasthan state registration, do pay the requisite entry fee.  It does not apply to private cars.
• If you not staying in the Govt Tourist Bungalow, arrive early so as to be able to spend 5 to 6 hours at the park.
• If you can walk 7 to 8 kilometers, walking is the best option.  Next best will be to rent a bicycle.  Keep the rickshaw as the last option.  The ride is not comfortable and 6 hours will set you back by ₹900 per rickshaw.
• Do carry good binoculars. Licensed rickshawpullers and guides are supposed to have binoculars and the rental / guide fee includes use of binoculars.  The ones we hired were not licensed but were still operating taking advantage of huge demand.

Government will do well to arrange battery cars for visitors. This would make things easy for everyone.

Back to the hotel, we had dinner and went to bed early so we could get up early for our visit to the Taj Mahal.  An account of that will form the fourth and the last post in this series.

Agra Visit (I)

Part I - Agra Fort and Reaching Fatehpur Sikri

Recently I visited Agra with my whole family including next and next++ generations.  I had made hotel bookings well in advance and also booked an Innova taxi that could carry all six of us.  However I remained apprehensive because of news of violence against some foreign tourists and huge crowds expected in Agra because of the weekend and Christmas holidays.

The journey to Agra on the newly consturcted Lucknow-Agra expressway was pleasant.  The expressway is very well constructed and a part of it is an airstrip where fighter jets can land and did land making a big news only a few months ago.  Three rest areas for being constructed on either side of the e-way.  Though these are still under construction, we did stop over at one for a biobreak.  The toilets were sparking clean.  As we talked about it, our driver remarked, "Just wait till people actually start using it!"

The toll on the e-way was still in trial phase, and we saved the toll tax both ways.  I understand that it is about to be launched in a few days from now.

The journey from Lucknow to Agra is about 4 hours and we reached in early afternoon.  We decided to visit the Agra Fort first and then check into the hotel.  We had purchased e-tickets in advance from the website of Archiology Survey of India.

There indeed was a huge crowd at the fort.  We noticed some people near the ticket window who were scanning the visitors and did look like guides.  However none of them approached us.  As we entered the premises, we were accosted by a guide who said that he was an ASI approved guide and showed his id to support the claim.  He said that his official fees were 685 but he would charge us only 500.  Though, he settled for Rs. 400.  We asked him to speak English for the sake of the kids who are more at home in that language.

The kids found his English hard to decipher and excused themselves so that they could roam around with me and just read the inscriptions on stone tablets.  The guide did not add much value to what we knew and what was available on the inscriptions. The only interesting thing that he told was that 75% of the fort was now in military’s control and off bounds for the public.  However he did click lots of pictures for us and that was appreciated.

We stayed back for the light and sound show.  We had to wait for a little more than an hour for the English show.  The show was terrible. Lights just moved from one area to another without much significance. People got bored and started leaving in the middle of the show.  A group of youngsters also raised slogans of “Bharat Mata ki Jai" for no reason except mention of Hindu wives of Mughal Kings. We, too, left before the end and proceeded to the Hotel where we had a good night’s sleep.

The next day we proceeded to Fatehpur Sikri. After exiting Agra, we had to drive on a really bad road which merged into a proper highway a few kilometers ahead.  A little before the entrance to the monument our car was stopped.  Our driver persisted and finally we were issued a parking ticket for ₹100 and allowed to go past.  After 100 meters or so, we cam to the entrance.  Our driver tried to bluff his way past the gate by telling the security that we were some VIPs from Lucknow but we asked him to back off.  As we stepped down, we were accosted by a person who offered to be our guide for a modest fee of ₹100.  The kids immediately rebelled, and we tried to shrug off the guide.  However, he persisted and lowered his fee to ₹70!  Finally, the offer was taken up and the kids had a pact with me to keep away from the guide and just roam around as they wished.

Later we realized the reason behind the desperately low guide fees, and that would be the subject matter of our next post in the series.

THE FINANCIAL RESOLUTION AND DEPOSIT INSURANCE BILL, 2016

THE FINANCIAL RESOLUTION AND DEPOSIT INSURANCE BILL, 2016

FRDI has surfaced in the Social media recently, thanks to a petition through change.org.  It is only after seeing the petition that I realized that I have already missed the window for offering comment.  It seems that FRDI did not figure in the news media with the intensity and urgency that it deserved.

I have downloaded the draft and browsed through it.  I also had to go through Banking Regulation Act to see the provisions in this act relating to winding up of banking companies that will be deleted by the proposed FRDI.

It cannot be gainsaid that economy and banking are based mostly on trust which governments and banks are under an absolute obligation to maintain and bolster.  Anything that even scratches this trust can prove disastrous.

The aforesaid is the reason that Capital Adequacy norms under the Basel Agreement are being continually refined and enforced worldwide by banking regulators.  The underlying idea behind Capital Adequacy norms is simple.  Banks have to use statistical tools to gauge the risk of losing money in their loans and investments portfolios and then provide enough capital to cover these risks so that the risk does not extend to the depositors.  This tells depositors that banks and regulators are dead serious about the safety of their money kept in the banks and will not allow it to be risked.

RBI, the regulator for the banking sector, has taken these norms in right earnest and has mechanism for Risk Based Supervision RBS) in place.  RBS ensures that no banks ever reaches the brink where its liquidation has to be contemplated:  And if it does, it loses no more than its share capital. As against this, FRDI proposes to wait till the institution reaches the brink and then pounce upon it and even breach the trust on which the financial sector rests.

FRDI proposes to move this risk assessment function to a Corporation. This hardly makes sense.  This Corporation will have 11 members on its Board.  Of these 4 will be representing the four regulatory authorities (Banking, Insurance, Pension, Financial Markets.) The remaining seven will be bureaucrats and other government appointees.  RBI and its Risk Based Supervision are working fine and cannot be bettered by this Corporation.

This proposed Corporation seriously encroaches upon the turf and erodes the credibility of regulators who are best placed to gauge and manage risk in their specific areas.  Though, their autonomy may not be liked much by the political establishment.

The act is strewn with provisions that make depositors suspicious and uneasy.  Read the subsection 1.15.ii.  It goes like this: Deposit means ………. but does not include “any amount due on account of any deposit with any insured service provider which has been specially exempted in this behalf by the Corporation with the previous approval of the Appropriate Regulator or, by a notification in the Official Gazette.”   Thus the corporation may, in its bureaucratic wisdom, exempt FD or / and RDs through a notification.  By the time this notification comes to our knowledge, the money would be gone.

The dreaded bail-in that forms the subject matter of section 52, is defined as under.

52.3 A bail-in provision means any or a combination of the following: –

(a) a provision cancelling a liability owed by a covered service provider;

(b) a provision modifying, or changing the form of, a liability owed by a covered service provider

(c) a provision that a contract or agreement under which a covered service provider has a liability is to have effect as if a specified right had been exercised under it.

In case of depositors, these means that your account balance could be written-down or written-off straight away, or could be swapped for shares in the worthless bank!  I am not able to make out what the subsubsection c means.  I guess that for FDs it could mean that your right to premature payment could be exercised by the Corporation.

There is a saving grace, though, in the form of section 55.  The relevant portion reads as under:

55.2.b "only those liabilities may be cancelled the instrument creating which contain a provision to the effect that the parties to the contract agree that the liability is eligible to be the subject of a bail-in."

If the proposed Bill goes through, we can be sure that account opening forms of banks will include a fine print saying that this deposit is eligible to be the subject of a bail-in.  While big depositors may be able to negotiate this clause out, the same leeway may not be available to people like us.

If the Bill goes through, even the existing depositors may get a communication congratulating them and announcing that their deposits have been made eligible for a bail-in!

Further, the proposed Bill effectively does away with Deposit Insurance.  As banks pay premium for this insurance, in the unlikely event of a bank reneging on its deposits, the insured amount must be paid by the insurer from its own funds.  The depositors then have to salvage whatever they can of their deposit from the liquidation proceeds.  This bill says that the first thing to be recovered by the Resolution Corporation from liquidation proceeds will be the amount it has paid to the depositors under the insurance scheme!! (Sec 29.4)

Also section 55 (1b and 1c) puts depositors and other creditors on the same footing, whereas the deleted sections of the Banking Regulation Act clearly state that depositors have to have the first preference.

FRDI also seeks to replace common sense with red tape.  Sec 68.1.3 states that, “A depositor or operational creditor may submit a claim to the liquidator in such form and in such manner and along with such supporting documents required to prove the claim as may be specified by the Board.”  Whereas the Banking Regulation Act clearly stated that depositors need not submit any claim and the balance in the books of the Bank will be automatically taken as the claimed amount.  Well, red tape is the first thing to be brought in by a bureaucrat ruled organization.

To sum up, the following questions on FRDI needs an answer from the government:

•         Basel Accord on Capital Adequacy and the current Risk Based Supervision are meant to ensure that a bank never reaches a stage where depositors’ money is jeopardised.  If, at all, it has to be liquidated it must not lose more than its capital.  In this regime where is the need for FRDI?
•         The Resolution Corporation is a serious encroachment on Regulator’s turf.
•         How is the Resolution Corporation supposed to carry out liquidation or merger of banks any better than the Regulators when bureaucrats and government nominees far exceed the regulators’ representatives on its board?

PostScript: I think I got part of the answer!  The bill says at one place that the bail-in will be used not only to absorb residual losses after entire capital is lost, but also be used to recapitalize it so that it can become viable again.  So, the government wants depositors to contribute their deposit towards share capital!