Consolidation of Indian PSU banks and the way forward

The increasing non‐performing assets (NPAs) and to meet the higher funding needs, India witnessed the biggest consolidation in public sector banks. In India the surging NPAs is long witnessed concern and major economic reforms were initiated in Indian banking to curb the issue. The recent merger has brought in a major policy concern with this consolidation which is availability of loans to smaller businesses. The paper analyses the impact of banks consolidation on Indian economy by considering both positive as well as negative aspects of banks mergers. The paper also presents the history of Indian banking and recommending a way forward.     

Asset quality determinants of Indian banks: Empirical evidence and policy issues

The Indian banking industry has been suffering from a huge number of nonperforming loans, and the loan asset quality has been deteriorated over the years. This has led to significant capital erosion of many banks in India. The surge in corporate defaults leading to an enormous rise in nonperforming loan assets has been impairing the performance of Indian banking industry in particular and economic growth in general. Hence, it is intuitive to ask what are the determinants of poor asset quality of Indian banks. To answer this question, using a sample of 47 commercial banks over a sample period of 2000 to 2014, our study examines the bank‐, industry‐, and macroeconomic‐specific determinants of asset quality of Indian banks. Our empirical analysis also accommodates the impact of different ownership structures (public and private sector) and the impact of financial crisis while analysing the determinants of poor asset quality of Indian commercial banks. Results reveal that bank‐, industry‐, and macroeconomic‐specific factors are responsible for the burgeoning nonperforming loan assets of Indian commercial banks. The results are qualitatively similar across different ownership structures. The findings suggest that forecasting models for nonperforming assets should also consider macroecomomic‐ and industry‐specific factors along with the bank‐ specific factors.     

Corporate governance challenges in Indian banks: A public affairs perspective

Weak governance framework in Indian public sector banks has paralyzed their performance with declining profitability and deteriorating asset quality. In order to tackle the governance issues in Public Sector Banks (PSBs), Indian government established Banks Board Bureau (BBB) in April 2016 to revamp the existing governance structure in PSBs. However, the issue management framework of establishing BBB is not immune to several challenges and has not been able to achieve its desired objectives. This paper looks at the weak governance issue in PSBs from an issue management perspective by using the famous Jones and Chase issue management framework. In light of this framework, the paper makes several recommendations to effectively address the governance challenges in PSBs in India. The findings of this paper may be useful for other emerging economies facing similar governance issues in their banking sector.     

A critical commentary on the proposals to reform India's financial system in its 2019–20 union budget

The 2019–20 Union budget aims to signal that the economic gains from cleaning of the financial system are likely to be recognizable in the future. The non‐performing assets in commercial banks have dropped substantively in last year subsequent to unprecedented recoveries over the past 4 years due to Insolvency and Bankruptcy Code and other legal measures, provision coverage ratio is now at its highest in 7 years, and domestic credit growth has risen to 13.8%. The government has smoothly carried out the consolidation of public sector banks. However, the drop in banks' NPAs appears to be reflected by a liquidity squeeze and mirrored by mounting NPAs confronting the non‐banking finance company (NBFC). In addition, the problems are acute for the analyzed sub‐group of Housing Finance Corporations. While the government has announced its decision to streamline the regulatory processes within this sub‐sector, it has mandated the banks, the chief source of funds to mobilize capital for the NBFCs that appear vital to revive India's economic growth. The government has raised tax rates for the uber‐rich and import duties on a few articles such as Gold while offering tax credits on affordable housing and electric vehicles. It has attempted to improve the microstructure of the capital markets, mitigate inefficiencies in the pension space and enhance market penetration of insurance and incentivize foreign investment through budgetary proposals. This article offers a critical commentary on the proposed policy actions.     

Lobbying and lending by banks around the financial crisis by

Despite the unprecedented levels of liquidity provided by the Federal Reserve to banks during the 2007–2008 financial crisis, lending by banks slowed dramatically during and after that global episode. In this study, we propose that, given capital constraints, the lobbying expenditures by banks to combat Dodd-Frank might have crowded out lending activity. A variety of univariate and multivariate tests show that while lending by banks fell significantly around the financial crisis, lobbying rose dramatically. Our results also show that bank lobbying and lending are imperfect substitutes during non-crisis periods. Such substitutability likely is explained by the value perceived in the political connections gained through lobbying, such as the ability to influence regulation, preferential treatment on supervisory or enforcement decisions, and protection against adverse shocks in the form of government bailouts.

     

The Punjab National Bank scam: Ethics versus robust processes

With the rising incidents of corporate scams, it has become imperative to lift the corporate veil to unearth the reasons behind them. As a result, it is of paramount importance to examine the formation of the companies entering into the contract—the executives, directors, and top management. A large‐scale scam hit the Punjab National Bank (PNB) in India recently with huge implications on its financial position and credibility. It is inferred through this work that violation of checks and balances led to the huge scam. Following this scam, several banks have initiated measures to prevent and early detect such manipulative practices. Banks have incorporated stringent verification of all stakeholders involved in any transaction and do not completely rely anymore on the Society for Worldwide Interbank Financial Telecommunications system. The Reserve Bank of India, as the apex governing body of all banking agencies in India, has also started taking measures to ensure that monitoring and control mechanisms are strong and robust. Finally, we present the way forward to prevent malpractices in the corporate world and the ethical implications in the society. Although any organization, especially, a public service organization does not allow any perpetrators into its systems, loopholes might exist that its internal or external stakeholders take advantage of. While emphasizing the needs for robust monitoring and audit processes to prevent violation by perpetrators, it is interesting to note that the same monitoring processes have brought out the scam to open for legal scrutiny, specifically at PNB.     

Managing the Bank‐System Crisis in Coordinated Market Economies: Institutions and Blame Avoidance Strategies in Sweden and Japan

Sweden and Japan represent two different positions regarding policymaking when faced with similar crises of the bank systems. Different institutional settings led the main actors to different paths of reactions in order to avoid blame. In the Japanese case, the very close relationship between private banks and the Ministry of Finance, in combination with the lesser degree of widespread perceptions of a system crisis, made it more urgent as well as possible to conceal the actual state of affairs for the politicians. Confronted with the threat of losing power over the financial administration to a new agency, the ministry postponed the reforms in order to conceal the deep financial problems. The institutional setting was different in Sweden. Deregulation had separated the government from the administration of banks. Among the public deteriorating economic conditions were easily connected to the banks. This brought about political unity. It was possible to put the blame on the banks and take the credit for the efforts to tidy up the mess without losing credibility.     

Beyond the Z-score: A novel measure of bank stability for effective policymaking

This article looks beyond Z-score and proposes a novel methodological framework to build an all-encompassing indicator of bank stability for individual banks using the optimisation-based ‘benefit-of-the-doubt (BoD)’ approach. Unlike other available approaches, this approach is totally data-driven and generates endogenous weights to aggregate sub-indicators of bank stability and dimensions. Further, the final outcomes are not limited to a scalar measure of bank stability. The unique optimal weights offer valuable policy-relevant insights and highlight the most precarious areas of stability, which demand the immediate attention of the bank's management and the industry regulators for both micro-and macro-level policymaking. Using the data of Indian public sector banks operating in the year 2018, the study illustrates the proposed framework to obtain a holistic indicator of bank stability, defined on 14 ratio sub-indicators and 5 broad dimensions (soundness, asset quality, profitability, management efficiency, and liquidity) of bank stability.     

Community engagement and public administration: Of silos,overlays and technologies of government

The public policy process in Australia is changing towards a more interactive, collaborative model, where governments seek to develop partnerships with civil society and private sector organisations to manage complex policy challenges. This article discusses research conducted into a project implemented by a Victorian government department that sought to involve stakeholders in addressing natural resource management issues in the agricultural sector. The research revealed that public administration practices associated with the new public management approach impeded the ability of the project to facilitate participation by diverse stakeholders in the decision‐making process. The article challenges the view that the discourse of collaboration and community engagement takes public administration down a constructivist path and suggests that agencies need to become reflexive about the way in which public administration practices are constitutive of the community engagement process if they are to facilitate genuine participation of other stakeholders.     

Does regulating remuneration affect the market value of European Union banks? Large versus small/medium sized banks

The aim of this paper was to analyze equity market reactions to the mandatory European Union regulation of remuneration policies in financial institutions. Using event study methodology, we investigated market reactions to the first European Directive on compensation policies after the financial crisis using a sample of 124 banks operating in the European Union. We divided the sample into two groups according to bank size considering four criteria: the US Dodd‐Frank Act 2010, the Liikanen Report 2012, Global Systemically Important Banks 2011, and the European Central Bank 2014. We found strong evidence of an average negative market reaction to compensation regulation. Moreover, this negative reaction is stronger for large banks than for small/medium sized banks.     

Analyzing the progress and prospects of financial inclusion in India

Taking data from Financial Access Survey, Global Findex and Reserve Bank of India bulletin, this paper tries to analyze the progress occurred and the future prospect of financial inclusion in India. Our analysis depicts that India has witnessed a quick progress in financial inclusion. Though there is long way to go to achieve the dream of universal financial inclusion, there is no doubt that tremendous progress has been achieved in the recent time. Specifically, after the implementation Pradhan Mantri Jan Dhan Yojana in August 2014, much improvement has happened in opening of bank deposit accounts. Similarly, the post‐dimerization period has seen a rapid growth of digital finance in India. Despite high growth of digital transaction, digital payment among the women, rural people, elderly people, and less educated people is much less than other groups of people. The provision of good digital infrastructure to the remote area, opening of more financial literacy centers and extension of credit to the marginalized people can help to fulfill the true essence of financial inclusion in India.     

Risk and Financial Armageddon in Ireland: The Politics of the Galway Tent

This article examines Ireland's financial crisis. Thus far explanation has focused on individual or collective administrative failure: the office(r) of financial regulation singularly failed to scrutinise the banks sufficiently: it was a matter of poor risk management. While this article would agree that the (mis)management of risk was important to how the crisis unfolded, I argue that an explanation of why the crisis emerged demands an altogether different focus. Put simply, after financial regulatory reform, a reconfiguration of risk in politics took place as the locus of decision‐making about financial risk shifted from the realm of the political/legal (Cabinet/Central Bank/Department of Finance) to the economic/legal (retail banks, shareholders/consumers). It was a critical development, one that mirrored events taking place in the UK, upon which Ireland drew experience, for now assessments about risk undertaken by the banks demanded that intervention could be justified only on an ascertainable risk, not a theoretical uncertainty (or spurious fear). The evidentiary bar for intervention was therefore raised, removing the precautionary instinct implicit in the prudential governance of Central Banks.     

THE IMPLICATIONS OF HIGH LEVELS OF PUBLIC SECTOR DEBT FOR ECONOMIC POLICY-MAKING: THE CASE OF SOUTH AUSTRALIA

Abstract: The relatively small and open South Australian economy has been facing the difficulties associated with the structural adjustment of its industry for over 15 years. In addition, the South Australian public sector has been contending with financial difficulties largely as a result of a reduction in grants from the commonwealth before the failure of the State Bank of South Australia. This paper reviews the growth and current level of government indebtedness in South Australia and discusses which group(s) is likely to bear the main burden of such debt. The main consequences of high levels of state public sector debt, including budgetary inflexibility, are also examined. The paper suggests that it will be necessary for relative wages and prices to adjust more freely if the negative impacts of an inevitable state government budgetary consolidation are to be minimised. If wages and prices are not free to adjust then unemployment will continue to take the brunt of the adjustment process. In addition, out-migration of businesses and people from South Australia will accelerate, leading to a further erosion of the taxation base. The State Bank indemnity arrangements and consequent levels of public sector debt incurred will require the state government to reduce the level and quality of services provided by the state public sector, sell state public sector assets and further improve efficiency and effectiveness. However, there are a number of important arguments why taxation should be an important means by which the South Australian government moves to retire public sector debt as soon as practicable. Not the least important of these arguments is the need to ensure accountability by elected representatives of government for their expenditure decisions.     

New public management reform in New Zealand: The collective strategy phase

This paper examines the New Public Management movement in New Zealand. Specifically the focus is on the financial management of central government departments and the shift in emphasis from management in the public sector to management of the public sector, that is, from defining management in terms of where it takes place to defining it in terms of the nature and outcome of the task.     

PRODUCTIVITY BARGAINING IN COMMONWEALTH GOVERNMENT ORGANIZATIONS

Abstract: Despite several experiments with productivity bargaining in the Commonwealth employment sector, the rigidity of employment conditions was considered to be a limiting factor to the wider application of this technique to the public sector. Nor did it appear to be suitable for adoption within the compulsory arbitration system. However the frustrated expectations of blue collar employees in government employment during the Labor government's term of office stimulated the exploration of productivity bargaining as a way of achieving reduced working hours without contravening efforts to restrain wage inflation. The events within the Australian Post Office (later to become the Australian Postal Commission and the Australian Telecommunications Commission), the Commonwealth Serum Laboratories Commission, the Overseas Telecommunications Commission and the Reserve Bank of Australia are described and some differences in the processes involved noted. The nature and significance of productivity bargaining as a technique for the immediate future are also discussed, particularly in the light of continuing stagflation and the interest of the government in wage restraint and national productivity growth.     

From Crisis to Opportunity: Human Resource Challenges for the Public Sector in the Twenty-First Century

A great deal of attention has been focused on the human capital crisis in the public sector since the mid-1990s. Experts and practitioners give many reasons why the current crisis emerged. This article examines the important factors that led to the crisis, what is being done about them through presidential agendas, legislators, oversight agencies, professional societies, and public policy think tanks. Concerns are many in terms of a large number of upcoming retirements, early retirements, unplanned downsizing, difficulty in attracting new generations to public service, and the changing nature of public service. However, the human resource crisis also presents an opportunity to fundamentally change those features of public sector human resource management practices that have become outdated for contemporary organizations and position government agencies for the twenty-first century by meaningfully reforming the civil service. This transformation would require public sector organizations to take a more strategic view of human resource management and to give greater policy attention to human capital issues.     

危机事件中的政府形象和政府危机公关

“9.11”事件标志着政府危机时代的到来。危机对于政府的形象而言既是机遇又是挑战。政府在危机中的一举一动都会受到公众的审视,对政府自身的形象产生巨大的影响,导致政府形象产生“挤出效应”。从而,政府危机公关应运而生。危机事件的特点和政府公共职能的特性决定了政府危机公关的特征。政府危机公关是建立在法律、技术、管理和社会4个支持平台上,在危机的预备期、冲击期、恢复期3个阶段从信息、行为、心理3个方面全面展开危机公关。     

The management of institutional innovation: Lessons from transferring the land grant model to India

The US and India collaborated on a successful institution building programme in the 1950s and 1960s to develop capacity for agricultural education, research and extension. This paper analyses that process for lessons that might bear on efforts to build similar institutions in other countries. India was an especially favourable environment due to the sophistication of its scientific base, the openness of its leaders to institutional innovation, the presence of public sector enterpreneurs to mobilize support for reform, and a food crisis that made it urgent to find new technology. The US did not fund institutional changes that had little demand in India, but it did influence Indian preferences over the long run by creating several mechanisms to exchange information about the American land grant system. These exchange mechanisms enhanced India's capacity for agricultural science and, less often noticed, contributed to the political support essential to new institutions.     

Before There Was Enron,There Was Orange County: A Study of Local Government Financial‐Oversight Committees

Recent financial scandals in some of America's largest corporations have prompted popular speculation that a similar crisis may occur within the public sector and, therefore, that government and nonprofit organizations should be required to adopt financial oversight practices similar to those that are mandated of publicly‐traded corporations in the Sarbanes‐Oxley Act of 2002. One of those mandated practices—the use of financial‐oversight committees—is already a common practice in public organizations, though little is known about its effectiveness. This study uses a national sample of local governments to examine whether financial‐oversight committees improve financial control and strengthen stakeholder confidence in financial reporting. The findings provide preliminary support for the use of financial‐oversight committees as an effective tool to improve financial accountability in local government.