Wednesday, 24 June 2015

Why RBI easing is ineffective and interest rates are still high

Why RBI easing is ineffective and interest rates are still high

Wednesday, 24 June 2015 - 1:40pm IST | Place: Mumbai

Despite the sharp policy rate reduction during the first six months of 2015, the effect hasn’t trickled down to domestic interest rates significantly – the average reduction in interest rates is still at 0.25 – 0.30%.
  • Raghuram Rajan, Governor, RBI during the second bi-monthly monetary policy announcement at RBI headquarters in Mumbai PTI
The Reserve Bank of India started its easing policy nearly two years back; then took a long break when it shifted focus from WPI to CPI, and restarted the cycle in the beginning of 2015. Since then, it has slashed policy interest rates thrice, by a cumulative 75 basis points or 0.75%. Despite the sharp policy rate reduction during the first six months of 2015, the effect hasn’t trickled down to domestic interest rates significantly – the average reduction in interest rates is still at 0.25 – 0.30%. 
Banks have listed a number of reasons for not reducing the lending rates; however, here are some actual reasons. 
BANKS ARE OLIGOPOLISTIC - The banking industry operates like an oligopoly in India, which means that most of the banks look towards the largest banks to see whether they have cut interest rates after the RBI policy, and then suit. This is despite the fact that there are a large number of public sector as well as private sector banks in India. 
In spite of a sharp reduction in credit growth and high Net Interest Margins (difference between cost of funds and average lending rates), most banks have refused to follow the central bank’s cues of cutting rates. After significant prodding by the RBI governor, banks reluctantly passed on just about 30-40% of the total rate cut.
Over the last one or two years, PSU banks have also become extremely wary of lending due to rising Non-Performing Assets (NPAs). This, however, has improved the rent-seeking ability of private sector banks, where the Net Interest Margins have increased steadily. Most banks have different cost of funds and different business models but the lending rates are always similar. 
HUGE NON-PERFORMING LOANS – Rising NPAs and restructured loans also reduce the ability of banks to cut interest rates. This is because, there’s a large proportion of the loan book which is neither fetching them any interest nor are they getting the principal amount back. On one hand, at a time when NPAs are increasing, there are a huge number of loans where the interest receipts are still being accounted for but not received by banks. Restructured loans also carry provisions that defer the principal amount or interest payments. On the other hand, banks still need to pay the interest on their deposits on time. This continuously creates a gap in cash receipts and payouts, and hence, reduces the ability of banks to cut interest rates. However, when the economy recovers and there is a reduction in NPAs, we might see sharper interest rate cuts. 
RBI HAS BEEN A RELUCTANT EASER- The RBI may have cut policy rates, however, it hasn’t created a scenario of excess liquidity in the system. This is easy for the RBI to do, even without cutting the Cash Reserve Ratio (CRR). 
1. RBI could have increased the Repo borrowing window which would have a direct impact on the lower rate lending abilities of several banks, as the Repo rate has been reduced by 0.75%, and there is substantial excess government bond holding with banks.
2. If RBI actually wants to push rates down, it could easily undertake Open Market Operations (OMOs) to buy government bonds from banks, and release liquidity into the economy. This would have an immediate impact on reducing the lending rates.
3. The Indian Rupee has become extremely uncompetitive as compared to most peer group emerging-market currencies. RBI has been a bystander in the entire process, and although it bought dollars from the markets, it wasn’t to its full extent. If done correctly, this could have had two impacts. First, the rupee would have been weaker than it is today, and provided a booster to exports and import substitution. The reserves which stand at $354 billion currently could have easily been closer to $400 billion. And second, it would have released rupee liquidity of Rs 1,50,000 crore into the system and brought interest rates down substantially from where they stand today. 
The reasons for high interest rates are not what the banks would like us to believe. The blame lies with both, the banks and RBI. There is need for better lending practices as well as an oversight over oligopolistic tendencies. RBI also needs to come out straight about the several measures it can take to bring rates down.
As the Chief Economic Adviser, Arvind Subramanian recently said, India has one of the highest real rates in the world today as WPI, the benchmark on which rates were set up to two years back, stands at -2.5%, and average bank lending rates are still upwards of 11-12%.
Sandip Sabharwal is a fund manager who runs an investment advisory company. He can be reached at his website.

Monday, 22 June 2015

When material touches surface black hole, it becomes near-perfect copy of itself: Study

When material touches surface black hole, it becomes near-perfect copy of itself: Study

When material touches surface black hole, it becomes near-perfect copy of itself

In a paper posted online to the arXiv preprint server, a physics professor of Ohio State University took proved mathematically that black holes are not necessarily arbiters of doom.

Samir Mathur claims the firewall theory has loophole and black holes create holograms rather than being ruthless killers. He mentioned that world could be captured by a black hole and people wouldn't even notice.

Samir Mathur, professor of physics at The Ohio State University, said they are actually tangled-up balls of cosmic string and are absolutory normal.

According to him, if Earth was sucked into a black hole, humans would not even notice as it would become a hologram copy and continue to exist.

However, when a group of researchers recently tried to build on Mathur's theory, they concluded that the surface of the fuzzball was actually a firewall.

According to the firewall theory, the surface of the fuzzball is deadly. However, Mathur and his team have come to a completely different conclusion, which states that black holes not as killers, but rather as benign copy machines of a sort.

The team mentioned that when material touches the surface of a black hole, it becomes a hologram, a near-perfect copy of itself that continues to exist just as before.

There is a hypothesis in physics called complementarity, which requires that any such hologram created by a black hole be a perfect copy of the original. The theory was first proposed by Stanford University physicist Leonard Susskind in 1993.

Mathur's research team has developed a modified model of complementarity, in which they assume an imperfect hologram forms.

Tuesday, 16 June 2015

MBA dropout sold FreeCharge for $400 million

Sunday, 7 June 2015

Buddhist monks-The darker side of Buddhism

The darker side of Buddhism

  • 30 May 2015
  • From the sectionMagazine
Buddhist monks at the Bodu Bala Sena (BBS) or Buddhist Force convention in Colombo on September 28, 2014.
Photo: AFP

The principle of non-violence is central to Buddhist teachings, but in Sri Lanka some Buddhist monks are being accused of stirring up hostility towards other faiths and ethnic minorities. Their hard line is causing increasing concern.
The small temple in the suburbs of Colombo is quiet. An image of the Buddha is surrounded with purple and white lotus flowers. Smaller Buddhas line the walls.
But upstairs, a burly monk in a bright orange robe holds forth - for this is one of the main offices of a hard-line Buddhist organisation, the Bodu Bala Sena or Buddhist Power Force (BBS).
The peaceful precepts for which Buddhism is widely known barely figure in his words. Instead, the monk, Galagoda Aththe Gnanasara Thero, talks of his Buddhism in terms of race. Most Buddhists here are ethnically Sinhalese, and Sinhalese make up three-quarters of the island's population.
"This country belongs to the Sinhalese, and it is the Sinhalese who built up its civilisation, culture and settlements. The white people created all the problems," says Gnanasara Thero angrily.
He says the country was destroyed by the British colonialists, and its current problems are also the work of what he calls "outsiders". By that he means Tamils and Muslims.
In fact, while a minority of the Tamils did indeed come from India as tea plantation workers, most of them, and most of the Muslims, are as Sri Lankan as the Sinhalese, with centuries-old roots here.
"We are trying to... go back to the country of the Sinhalese," says Gnanasara Thero. "Until we correct this, we are going to fight."
Galagoda Aththe Gnanasara Thero
Galagoda Aththe Gnanasara Thero. Photo: AFP
This firebrand strain of Buddhism is not new to Sri Lanka. A key Buddhist revivalist figure of the early 20th Century, Anagarika Dharmapala, was less than complimentary about non-Sinhalese people. He held that the "Aryan Sinhalese" had made the island into Paradise which was then destroyed by Christianity and polytheism. He targeted Muslims saying they had "by Shylockian methods" thrived at the expense of the "sons of the soil".
And later, in 1959 Prime Minister SWRD Bandaranaike was assassinated by a Buddhist monk - the circumstances were murky but one contentious issue was the government's failure to do enough to ensure the rights of the Sinhala people.
The long war against the Tamil Tigers - a violent rebel group purporting to speak for the Tamil minority - brought the hard-line Buddhists into their own once more. Portraying the war as a mission to protect the Sinhalese and Buddhism, in 2004 nine monks were elected to parliament on a nationalist platform. And it was from the monks' main party that Gnanasara Thero later broke away, in time forming the BBS. It is now the most prominent of several organisations sharing a similar ideology.
Since 2012, the BBS has embraced direct action, following the example of other like-minded groups. It raided Muslim-owned slaughter-houses claiming, incorrectly, that they were breaking the law. Members demonstrated outside a law college alleging, again incorrectly, that exam results were being distorted in favour of Muslims.
Now that a Tamil adversary has been defeated, Muslims seem to be these nationalists' main target, along with evangelical Christians whom they accuse of deceitfully and cunningly converting people away from Buddhism.
But can the BBS be called violent? "Whenever there is something wrong done by a Buddhist monk everything [is blamed on] us because of our popularity," says BBS spokesman Dilantha Withanage.
"BBS is not a terror organisation, BBS is not promoting violence against anyone... but we are against certain things." He cites threats by Islamic State to declare the whole of Asia a Muslim realm.
Time and again he and his colleague bracket the word "Muslim" together with the word "extremist".
Dilantha Withanage
"BBS is not promoting violence against anyone" - Dilantha Withanage
They are not the only Sinhalese who express discomfort at a visible rise in Muslim social conservatism in Sri Lanka. More women are covering up than before and in parts of the country Saudi-influenced Wahabi Muslims are jostling with more liberal ones.
Yet there is no evidence of violent extremism among Sri Lankan Muslims. Rather, they have been at the receiving end of attacks from other parts of society.
In the small town of Aluthgama last June, three people died in clashes that started when the BBS and other Buddhist monks led an anti-Muslim rally in a Muslim area. At the time, I met Muslim families whose homes and shops had been burnt and utterly destroyed, and who were cowering in schools as temporary refugees.
Moderate Buddhists have also been targeted by hard-line ones.
Last year Rev Wathareka Vijitha Thero was abducted, rendered unconscious, tied up and forcibly circumcised - he says this was meant as a gesture of ridicule because he had worked for closer cooperation between Buddhists and Muslims.
He believes Buddhist monks - he doesn't know who or whether they were aligned with any particular group - were responsible.
In a separate case, a few weeks earlier, Vijitha Thero had held a news conference to highlight the grievances of the Muslim community - the gathering was broken up by the BBS. Gnanasara had hurled insults and threatened him: "If you are involved in this type of stupid treachery again, you will be taken and put in the Mahaweli River," he said.
The reference to the Mahaweli is significant - there was a left wing insurrection against the Sri Lankan government in 1989 - it's estimated 60,000 people disappeared and many dead bodies were dumped in the river.
Another country where fierce Buddhism has recently made headlines is Myanmar, formerly known as Burma. A Buddhist faction there, the 969 movement, is known for strident anti-Muslim campaigns that have triggered widespread violence.
Myanmar monk Shin Wirathu arrives with Gnanasara Thero for the Bodu Bala Sena (BBS) or Buddhist Force convention in Colombo on September 28, 2014
Shin Wirathu (centre) arrives with Gnanasara Thero (left) for the Buddhist Power Force convention in Colombo in 2014. Photo: AFP
Its leader, Shin Wirathu, was recently invited to Sri Lanka by the BBS. Both organisations say that even if Buddhism predominates in their own countries, overall it is under threat. "We want to protect it, therefore we signed a memorandum of understanding on forming alliances in the Asian region," says Withanage.
In January, Sri Lanka unexpectedly elected a new president, Maithripala Sirisena. He told me that "everybody knows" who gave rise to the BBS - implying that it was the administration of his predecessor, Mahinda Rajapaksa. The previous government was, at least, strongly supportive of the organisation.
And the group thrived because the rule of law had broken down, according to the new minister for Buddhist affairs, Karu Jayasuriya. He has told me that the BBS will be reined in. On Tuesday, Gnanasara Thero was arrested for taking part in an unauthorised demonstration but later freed on bail. Thus far, the new government - which, like the old one, includes a strongly Buddhist nationalist party - seems timid about taking on the men in orange.

Why are Buddhist monks attacking Muslims?

Buddhist monks take part in a demonstration against the Organisation of the Islamic Conference in Rangoon, in October 2012
Of all the moral precepts instilled in Buddhist monks the promise not to kill comes first, and the principle of non-violence is arguably more central to Buddhism than any other major religion. So why have monks been using hate speech against Muslims and joining mobs that have left dozens dead?
This is happening in two countries separated by well over 1,000 miles of Indian Ocean - Burma and Sri Lanka. It is puzzling because neither country is facing an Islamist militant threat. Muslims in both places are a generally peaceable and small minority.
In Sri Lanka, the issue of halal slaughter has been a flashpoint. Led by monks, members of the Bodu Bala Sena - the Buddhist Brigade - hold rallies, call for direct action and the boycotting of Muslim businesses, and rail against the size of Muslim families.
While no Muslims have been killed in Sri Lanka, the Burmese situation is far more serious. Here the antagonism is spearheaded by the 969 group, led by a monk, Ashin Wirathu, who was jailed in 2003 for inciting religious hatred. Released in 2012, he has referred to himself bizarrely as "the Burmese Bin Laden".
March saw an outbreak of mob violence directed against Muslims in the town of Meiktila, in central Burma, which left at least 40 dead.
Tellingly, the violence began in a gold shop. The movements in both countries exploit a sense of economic grievance - a religious minority is used as the scapegoat for the frustrated aspirations of the majority.
On Tuesday, Buddhist mobs attacked mosques and burned more than 70 homes in Oakkan, north of Rangoon, after a Muslim girl on a bicycle collided with a monk. One person died and nine were injured.
But aren't Buddhist monks meant to be the good guys of religion?
Aggressive thoughts are inimical to all Buddhist teachings. Buddhism even comes equipped with a practical way to eliminate them. Through meditation the distinction between your feelings and those of others should begin to dissolve, while your compassion for all living things grows.
Of course, there is a strong strain of pacifism in Christian teachings too: "Love your enemies and pray for those who persecute you," were the words of Jesus in the Sermon on the Mount.
But however any religion starts out, sooner or later it enters into a Faustian pact with state power. Buddhist monks looked to kings, the ultimate wielders of violence, for the support, patronage and order that only they could provide. Kings looked to monks to provide the popular legitimacy that only such a high moral vision can confer.
The result can seem ironic. If you have a strong sense of the overriding moral superiority of your worldview, then the need to protect and advance it can seem the most important duty of all.
Christian crusaders, Islamist militants, or the leaders of "freedom-loving nations", all justify what they see as necessary violence in the name of a higher good. Buddhist rulers and monks have been no exception.
Buddhist monks take part in a demonstration against the Organisation of the Islamic Conference in Rangoon, in October 2012
So, historically, Buddhism has been no more a religion of peace than Christianity.
One of the most famous kings in Sri Lankan history is Dutugamanu, whose unification of the island in the 2nd Century BC is related in an important chronicle, the Mahavamsa.
It says that he placed a Buddhist relic in his spear and took 500 monks with him along to war against a non-Buddhist king.
He destroyed his opponents. After the bloodshed, some enlightened ones consoled him that the slain "were like animals; you will make the Buddha's faith shine".
Burmese rulers, known as "kings of righteousness", justified wars in the name of what they called true Buddhist doctrine.
In Japan, many samurai were devotees of Zen Buddhism and various arguments sustained them - killing a man about to commit a dreadful crime was an act of compassion, for example. Such reasoning surfaced again when Japan mobilised for World War II.
Buddhism took a leading role in the nationalist movements that emerged as Burma and Sri Lanka sought to throw off the yoke of the British Empire. Occasionally this spilled out into violence. In 1930s Rangoon, amid resorts to direct action, monks knifed four Europeans.
More importantly, many came to feel Buddhism was integral to their national identity - and the position of minorities in these newly independent nations was an uncomfortable one.
In 1983, Sri Lanka's ethnic tensions broke out into civil war. Following anti-Tamil pogroms, separatist Tamil groups in the north and east of the island sought to break away from the Sinhalese majority government.
Muslim Rohingyas sitting inside their collective tent at the Dabang Internally Displaced Persons (IDP) camp
Violence has left many Burmese Muslims homeless
During the war, the worst violence against Sri Lankan Muslims came at the hands of the Tamil rebels. But after the fighting came to a bloody end with the defeat of the rebels in 2009, it seems that majority communal passions have found a new target in the Muslim minority.
In Burma, monks wielded their moral authority to challenge the military junta and argue for democracy in the Saffron Revolution of 2007. Peaceful protest was the main weapon of choice this time, and monks paid with their lives.
Now some monks are using their moral authority to serve a quite different end. They may be a minority, but the 500,000-strong monkhood, which includes many deposited in monasteries as children to escape poverty or as orphans, certainly has its fair share of angry young men.
The exact nature of the relationship between the Buddhist extremists and the ruling parties in both countries is unclear.
Sri Lanka's powerful Defence Secretary Gotabhaya Rajapaksa was guest of honour at the opening of a Buddhist Brigade training school, and referred to the monks as those who "protect our country, religion and race".
But the anti-Muslim message seems to have struck a chord with parts of the population.
Even though they form a majority in both countries, many Buddhists share a sense that their nations must be unified and that their religion is under threat.
The global climate is crucial. People believe radical Islam to be at the centre of the many of the most violent conflicts around the world. They feel they are at the receiving end of conversion drives by the much more evangelical monotheistic faiths. And they feel that if other religions are going to get tough, they had better follow suit.
Alan Strathern is a fellow in History at Brasenose College, Oxford and author of Kingship and Conversion in Sixteenth-Century Sri Lanka: Portuguese Imperialism in a Buddhist Land