Aa Baile Mujhe Maar

Dear Readers. Here is a serious question for you. Assume you are walking through a safe road.
Now, would you, on purpose, become ambitious and start walking through a minefield- laden pathway going parallel to it? A sane answer would be in the negative! But India is about to change its track from a safe roadway to one laden with potential minefields, which may not be visible today. After deliberations and hesitations, the RBI announced yesterday its intention to allow Business houses / Companies to apply for a banking licence (of all things!). Many may argue that this is a part of the reforms process and hence justified. The Experts / foreigners / Companies / Economists et al may well applaud the RBI for taking such a bold step. But then Bold is not necessarily always beautiful. Is it? Banking as an industry is one which is built upon trust. The banks are accepting and holding money in a fiduciary (trust-based) capacity. You may note that a trust based relationship is one which is built up on ethical and moral standards. The question then is: are Indian Business houses and Companies morally and ethically ready to take up the role in a fiduciary capacity? In a country where Business and Politics (and hence Corruption) go hand in hand, can (or should) the general public entrust its hard-earned money to Business houses? One argument could be that the general public in any case invests in the stocks of business houses / companies so what is the harm in entrusting money to them. There is a difference of course. When you entrust money to a bank, there is an assumed satisfaction of safety of money. The question again comes back. Can you have a sound sleep if you have bank accounts with Companies? To make matters still worse, even the precarious Real-estate companies and Brokerages have not been excluded (means included). By allowing Companies and Business houses in the banking space, why is the RBI governor giving an open invitation to Lehman- like crises a few years from now? Remember, a Lehman like crises if ever it occurs in India, can easily crush the fragile Indian Economy. We are not yet robust (strong) enough to withstand, even a crises, one-tenth of the size of the one we saw in 2008. It will also do well to remember that the world economy is still struggling to recover from the 2008 crises. The so called experts may again argue that the possibility of such an event is remote or negligible. To these experts, I recommend a thorough reading of Nassim Talebs book The Black Swan. The book explains how an event which has a one-in-a-million chances occurs more frequently than we can imagine. The probability of a Lehman like crises to occur was one in a few thousand years. But we did see it in our own lifetime! One of our greatest flaws, as humans, is that our practical memory is too short and that we never learn from past experience of our own nor of others. So, are we and our next generations, then destined to walk the minefield-laden dangerous path and keep our fingers crossed? I presume that may well be our destiny! CA Rajiv D Khatlawala