Adventures in Banking - II

After completing my probation (2 years), I was posted to the back of beyond of Bihar to do my rural and semi-urban assignments (3 years). On coming out from the cold, I got an extremely plum assignment at the Credit Appraisal Department at the bank’s Head Office. One of the corporate accounts which I was assigned was “B”, which was the first major credit relationship that I handled in my professional banking career and which was a major learning experience.

At the time I was assigned this relationshp (early 1990s), the banking system had an exposure of some Rs.60-70 crores to B through an informal consortium of 6-8 banks, with the bank I then worked for having the largest exposure. 

It so happened that “B’s” management had been taken over by the State Government and it was the primary agency for distributing fertilisers to small and marginal farmers in the State. Since they were bankrupt, a group of banks were coaxed (with RBI acting as midwife) to lend a sum of Rs.52 crores to purchase fertilisers for onwards sales to farmers. The money was borrowed, used to purchase fertilisers, and there the story took a completely different turn. Very little of the borrowed money in the form of sale proceeds came back to the lending banks and "B's" financial position was back to square one.

The same group of banks were again coaxed to lend another Rs.12-15 crores and the whole story was exactly repeated.

In classic credit exposure terms it was a clear Loss Asset situation. There was no collateral security of any kind tangible or intangivble say as guarantees. There were no financial statements to be analysed (historical or pro-rata future). As “B’s” books had not been audited for over 10 years) there was no way to evaluate its financial condition or prospects and there were no stock statements or any kind of data to support what happened to the primary security or the sale proceeds. In fact there were virtually no officials / management personnel of the borrowing entity with whom we could have any kind of meaningful dialogue on this matter.

In this dilemma we started writing very polite letters to the State Govt at the highest levels (Chief Secretary, Finance Secretary etc) requesting for their very kind intervention for recovering our dues. Copies of all letters were marked to the highest levels in RBI. A minimum of one to two letters used to go every quarter with minor variations in language and emphasis. It was more of an exercise in creative writing in English for me, the lowest rung in the hierarchy. This was supported by way of meetings by the Bank’s top officials with top bureaucrats in the Government and RBI. For quite some time nothing happened, and the consensus was that this was an exercise in futility. But we kept persisting with the same strategy of supplicating the State Government and RBI in the absence of any other solution.  

Slowly wheels moved and after more than a year, the State Government agreed for RBI to directly debit their account (with RBI) in installments and repay the banks. In the process we got back our entire principal along with a fairly decent amount of interest. Though the entire process took 2-3 years more. 

Credit Lesson 102: There is life beyond obtaining and analyzing financial statements, depending on security, writing detailed appraisal memos, or seeking legal action in managing credit exposures! Sustained and regular follow-up also leads to progress – it may be slow and painful. But it is effective. Maybe we were plain lucky. But it has worked for me in many other sticky accounts too!

PS: Handling Government banking business in Indian banks used to be given very low priority. This is strange, considering the size and potentiality of this kind of business. Incidentally, one of the main functions of indigenous bankers in India was to collect land revenue and transfer it to the ruler for which they were entitled to a commission on the revenue collected, that is very similar to present day government banking business. Because of which, these bankers had a very good estimate of the revenue yielding capacity of the areas for which they collected revenue and used this information for what was effectively corporate takeovers. From among the examples I am aware of, Gulab Singh borrowed Rs. 75 lakhs from Sheikh Saudagar to purchase Kashmir from the British, the Jagat Seth's of Murshidabad financed Robert Clive (reportedly 1 million pounds) for overthrowing Siraj ud Doulah and taking over the rich province of Bengal, and a group of Banaras bankers financed a small time zamindar from Jaunpur to purchase the kingdom of Banaras again from the British.      

Adventures in Banking - I

In December 2001 I moved job and city. In my new assignment, I inherited a few credit relationships (ie where the bank had given loans or advances) which were not particularly in the pink of health. Some because they were undergoing financial stress, others because of liquidity strain since they had over-borrowed. One such exposure was to “N” the flagship company of a large well-respected corporate group. It was a large well-known profitable company with sound financials. Naturally it attracted corporate bankers keen on making safe lending the way honey attracts flies.

N had a borrowing arrangement through a consortium for its working capital requirements and with all India DFIs for term debt. In addition, it had borrowed (rather it was lent) clean “corporate loans” with no clear end-use from a number of banks trying to edge into its regular banking relationship.  These loans were largely structured by way of periodical payment of interest with bullet repayment of principal. In view of the size of operations of the company or exposure, each of these corporate loans was of relatively small size and could be easily repaid out of its cash flows – provided there was no bunching of repayments.

In this way the company had raised about Rs.100 crores and had invested it in an unrelated diversification project which had some major teething problems and the expected cash generation did not happen.

Since the company’s liquidity position was very tight and there was ample evidence of diversion of funds, the working capital consortium had put in place a system whereby all sale proceeds were credited in a single account with the lead bank. Each payment from that account was monitored by the lead bank, with payments only being permitted for normal operations such as payment to suppliers, employees, taxes etc. There was little scope for paying to other financial creditors which the working capital consortium did not approve of.

Given the size of their operations and stability of cash flows servicing of these corporate loans had not been considered a major risk factor by the lending banks. I had just joined a new assignment and the branch had one such Rs.20 crores corporate loan exposure. Interest was being serviced regularly but at the time of bullet principal repayment the company requested and was given time for 30 days to repay the amount. The 30 days turned to 60 and then to 90, but the principal repayment did not materialize. Interest payment also started getting delayed and then stopped. In effect the exposure became an NPA.

Given the size and prestige of the company, taking legal recourse was temporarily deffered for two reasons. First, it would have been costly and time consuming. Second, and more importantly, this was a well-known corporate and filing suit for recovery may have brought adverse publicity to the bank in the corporate lending market. The only option left to effect recovery was to supplicate the company’s top management. Towards this I started visiting the Company’s corporate office on a regular basis to meet and request the top managers for repayment of the loan. In this course I met the CEO who directed me to the Director Finance. We had a couple of very cordial meetings where the DF explained the liquidity problems being faced by them and assured me it was a temporary issue. But the proof of the pudding is in eating it, and there were no further repayments was forthcoming.

Thereafter, the DF started avoiding meeting me and I ended up sitting long hours in his ante-chamber trying to meet him without any actual meeting. This was upsetting my other work schedules and therefore I decided to try and meet him in the evening after finishing my day’s work. This tactic was also unsuccessful and I could not get to meet him even though I sat quite late in the evening in this company’s office over several days.

Meanwhile the pressure on me to get the account regularized had become quite intense.

Now this company had a culture / practice of serving tea with a substantial snack for all employees and visitors sitting in office after 7 pm. The first day I also partook of the tea and snacks, but later felt uncomfortable of having taken it. From the next day, I politely refused it under some pretext or other. After a few days, the DF’s secretary came and requested me to take the tea and snacks. I thanked him and very politely told him that I have been coming to meet the DF and not eat. He went and informed this to the DF, who came out of his cabin and escorted me to his cabin. He then told me that my refusing the snack was embarrassing for him. I just reiterated my request for repayment of our loan.

The next day we got a cheque for the full principal dues paid out of an account which the consortium leader was not aware! We appropriated it and advised them the remaining interest dues (a very nominal amount). Within a few days the balance interest payment was also received.

Lesson 101 – There is more to loan documents, security, financial analysis, legal recourse, registration of charges etc etc for effecting recovery in NPA accounts.

Charging For UPI Transactions

As per newspaper reports, the Standing Committee on Finance has informed the Parliament that the current UPI (Unified Payments Interface) setup is financially unsustainable and threatens critical investments in cyber security, fraud prevention, and network infrastructure. To address these issues the government is planning to make changes in the way users pay for this service and two modalities are being explored. The first is to charge certain high value transactions and high turnover merchants. The second is to have a tiered incentive structure so that the government can phase out its current scheme under which it compensates payment ecosystem players for a portion of the cost of processing low value UPI Transactions conducted at small merchant establishments.

It is true that banks & NPCI have invested large amounts of capital, both on hardware and software, to operationalize UPI and there are large continuing operational expenses which is partly funded through subsidies from the government. For continued stable operations of UPI clear sources of regular income needs to be identified to fund not only the operational expenses but also investments to make it better.

But we need to look at the other aspects of the picture too.  

First, one of the biggest contributions to growth is the financial system providing a cost effective, easy to use medium of exchange, which in turn enables trade on which ultimately all economic investment and growth depend. In this regard, UPI has turned out to be a real game changer and any tinkering in its functioning should be clearly and deeply thought through.

Second, handling physical money, especially small denomination notes and coins, apart from being a major expense due to its labour-intensive nature, is also prone to fraud. Using electronic means of payment, such as UPI, helps in virtually eliminating this in the operations of banks and businesses. In all discussions on the operations of UPI, there is no mention of the large tangible savings it has engendered. 

Third, the hard fact is that over 90% of UPI transactions are carried out by non-bank apps, of which only two – Google Pay and Phone Pe have roughly 40% each. Look at the irony of the situation – money moves from one bank account to another, either in the same bank or another but using third-party apps. Now since the transaction moves through a third-party app, all the information embedded in it is lost to the banks!

Are these third-party service providers doing charity, or are they being unduly subsidised by the government, or do they lack business sense. Actually, none of the three. The information embedded in the transactions is pure gold. It can be and is being used for designing marketing programs, profiling customers and targeting them. There is no way that the operational mismatch between what the government pays (Rs.2,000 crores) for keeping the UPI structure functional and the operational costs of running UPI (Rs. 20,700 crores) is sustainable without the players thinking out how to make the system pay for itself.

Fourth, the trails of cash flows created by UPI can be utilised for building credit products by banks, especially for the MSME and retail sectors. Something the banking industry has miserably failed to do, but fintecs are attempting. Failure by our banks to evaluate and build such credit products for this large and lucrative segment will very soon find them out of that market totally. Just as they find themselves out of the payment apps market. The security provided by clear, sustainable, and identifiable cash flows is much more tangible and immediate than the ephemeral collateral security banks keep running after.

Finally and most importantly, UPI is a public good which has unwittingly resulted in myriad benefits to the bottom third of society. From demonstrating the benefits of having a bank account to making it operational at little cost and effort – no need to visit a bank branch and waste time and money in doing so. Something all these years and efforts have miserably failed to do.

It would be very short-sighted and counter-productive for the economy if the Government now blindly starts charging for UPI transactions without taking into account the myriad benefits. It would be akin to killing the goose that lays golden eggs.  

The funding for keeping and improving the infrastructure should come from those large players who can immeasurably benefit from it – in sheer financial terms. The banks and the fintecs who can and are profitably using the information generated by UPI. After all, information is the new oil.  

I sincerely hope that better sense prevails.

The Fetish of Vegetarianism

Food habits in all societies is a matter of what is locally available and on what all foods we have evolved on. We Indians are able to celebrate vegetarianism simply due to availability of a wide variety of easily available edible plants. However, the reality is that majority of Indians do partake of non-vegetarian food, including beef, and the fetish for vegetarian diets is quite recent.  The fact of the matter remains that there is need for good quality animal protein in our diet for living a healthy life.

K T Achaya, one of India’s greatest food historians has mentioned the wide variety of meats eaten in India, such as, crocodile, turtles, and of course beef. Even some of our scriptures celebrate offering non-vegetarian food to honoured guests. Moreover, even Brahmins freely partook of non-veg food. The initial impetus towards vegetarian foods may have started under the influence of Buddhism and Jainism, but there has also been an important sociological force which is much more important. It has been technically named as “sanskritisation” of Indian society by the sociologist M N Srinivas. As different social groups try to jockey for greater power, prestige, and acceptance, they start emulating those social groups from whom they want to grab power. Towards this, the tendency in India has been, inter alia, to start practicing vegetarianism, wear the janeu, right to carry arms etc., essential markers of higher castes. 

Tibetans are invariably Buddhists, but meat remains an essential part of their diet. The Dalai Lama mentions in his autobiography that though Tibetans as Buddhists abjure violence there is no way they could survive in those climes without non-vegetarian food, as little edible plants grow in those regions. They solved the problem by having non-Buddhists as butchers in Tibet. The loop-hole is that while killing is a crime, purchasing meat is not.

Sikkim solved the same problem with a twist since there are few non-Buddhists in their area who could take up butchery as a profession - so who would slaughter the animals? Another simple solution was found. Contrive that some animals fall from the steep mountains and die – their flesh can then safely be eaten.

Both Thailand and Cambodia are also largely Buddhist. But I have found little trace of vegetarianism there. It is extremely difficult to get vegetarian food in both these countries, and even among the options available, egg is invariably included in vegetarian menus. I experienced similar conditions in course of my travels through Hongkong & Macau, with the honourable and superb exception of the Po Lin monastery in Hongkong. What superb pure Chinese vegetarian food!

Jared Diamond in his book, Guns, Germs, and Steel brings a different perspective to the question of food preferences. In his opinion, societies in which dog meat is found acceptable for consumption are those where other forms of animal protein are not easily available. He extrapolates the logic to peoples who practice cannibalism. According to him, human flesh is the most readily available animal protein in such societies. Humans evolved on animal protein and it is essential for their healthy survival.

For those looking for hard proof that we humans evolved on animal proteins, consider as to why has our appendix virtually shrivelled off? Herbivores, such as horses who eat a lot of plant material have extremely large and functional appendix. Or why do vegetarian suffer from deficiency in certain key vitamins and nutrients, such as, Vitamin B12 (cobalamin), preformed Vitamin A (retinol), Vitamin D3, and compounds like carnosine and taurine. Simply because they are found exclusively or primarily in animal products (meat, fish, liver, eggs, dairy). These nutrients are crucial for nerve function, vision, immune health, and energy production, and are not naturally found in plants.

Our so called “pure” vegetarians quite satisfactorily resolved this dilemma by classifying milk and milk products as “vegetarian” foods. Now by what stretch of imagination is milk (irrespective of its source – cow, buffalo, donkey, or goat) vegetarian? Find me one, just one, die-hard Hindutva bhakt who is willing to concede that milk and its byproducts (ghee, curd, chas, khova, paneer) etc are non-vegetarian foods. You will be doing me a mighty favour.

Consumption of milk and milk products is sanctified essentially since they provide the critical nutrients and vitamins which is required for a healthy life. Last but not the least. Ghee is an animal fat which is virtually identical physically and chemically to animal lard.  Is it anyway surprising that lard is regularly and widely used to adulterate ghee, especially considering it is much cheaper.

In all the confusion about the supposed superiority in the practice of vegetarianism it is refreshing to find a few sane and logical voices. For example, Swami Vivekanand. Not only was he partial to meat and fish, he did not proscribe a non-vegetarian diet for his disciples, including sanyasis.

This is not supposed to be a polemic justifying eating of non-vegetarian food but an earnest request not to make vegetarianism into a fetish. After all mankind is the only species which kills for pleasure. 

The Travails of the Indian Banking Industry

What is happening inside the great and mighty HDFC Bank! The Chairman with long years of experience in the topmost echelons of bureaucracy and after a five-year stint in the bank suddenly realises that there are “happenings and practices which are not in congruence with his personal values & ethics”. Without elaborating it.

Are such aberrations specific to HDFC Bank or rampant in the Indian banking industry? Are the high valuations by the so-called tech savvy private sector banks justified and to what extent?

Are these banks really effective and efficient as they claim to be and the investing public believes?

Dig a little deeper and the health of the banking industry, including banks such as HDFC Bank slowly reveals a different picture.

Their high valuations seem to be wholly on account of the competition (read public sector banks) being even worse, much worse.

Public Sector banks, including SBI, have been losing market share year after year over the last 30 years. Over a ten-year period from 2010-11 to 2020-21, the government had to pump in Rs.3,74,012 crores as equity to just make up for their inefficiencies and losses. Even in the mighty and holier than thou SBI a sum of Rs. 36,750 crores had to be infused as equity. This is tax-payers money - ie your and my money. For what purpose? Just because they are inefficient and ineffective.

This is only one part of the cost that you and me are paying. Since, these banks are not making money on their lending business, they give miserly interest rates on their deposits. Just about equivalent to inflation rates and often below it. The depositing public is effectively losing the value of their savings if they keep it as bank deposits. And then there is the double whammy - interest on bank deposits attract income tax at the highest marginal tax rate.

So, the public has responded with its feet by walking out from patronising the banking industry more than is essential. Long term savings are steadily moving out from the banking to the Mutual Fund industry for the last 10 years. This has its own set of issues, which we will keep for another day.

One of the key functions of the banking industry is to move funds from the household sector to the productive sectors (agriculture, industry, services) which in turn creates jobs and income. Credit to GDP ratios are stagnant and compared to world averages quite low. Services which account for 55% of GDP gets only around 30% of bank credit. Both Agriculture and Industry, especially MSMEs, are starved for productive credit. Factors such as these lead to retardation in growth rates of income and employment of the country.

Look at UPI transactions where banks face competition from app based entities. UPI move money goes from one bank account to another, but over 95% of transactions go through non-bank apps. Why so? Are these app providers doing it for charity!

What is the solution? Wait for the Small Finance Banks to grow over the next 5-10 years so that there is effective competition and things improve? It is estimated that GDP growth with improve by around 2% per year if we are able to fix the myriad problems of our banking industry.

Or do away with the root of the problem - once and for ever. Abolish the Department of Financial Services, under whose stewardship over the last 56 years the banking industry has come to such a pass. The babus of DOFS with their immense powers enjoy virtually limitless control rent while having no equity stake! A better example of perverse incentives at play would be difficult to find.

On Water and its Management : Experience with Rain Water Harvesting

I live in a large “gated community” in Hyderabad, designed and built by one of the country’s top most construction companies. It is spread over about 30 acres and includes more than 1000 apartments, Club House etc. Construction of the township started in around 2004 with the last set of apartments sold and occupied by 2010.

Water for the township’s requirements is sourced through three sources, HWSSB (Hyderabad Water Supply and Sewerage Board – Manjeera Water), own borewells. When both these fail to supply sufficient water, recourse to tanker water is taken which is both costly and of suspect quality.

The township also has three Sewage Treatment Plants (STPs) with aggregate daily processing capacity of 1,100 KL of sewage and generates around 600 KL of treated STP water every day. This water is used for flushing and irrigating the gardens and plants within the township. This still leaves a daily surplus of around 200 KL of STP treated water even during peak summer, which is currently disposed into sewer lines. Finding a regular buyer would give some regular additional income and the same is being actively pursued.

The developer had provided for a few borewells initially, but within a few years yields of most of these borewells started dwindling. Thereafter the Residents Welfare Association (RWA) got some more borewells drilled. But the yields of the borewells also started dwindling and became meagre and all of them used to go totally dry by the time summer approached.

The RWA then approached outside consultants for advice on Rain Water Harvesting. All the consultants advised to go in for harvesting of terrace rain water and use that water for recharging existing dry borewells. A sum of nearly Rs.30 lakhs was spent for this purpose but there was absolutely little improvement in the yield of the borewells. This resulted in severe water crises during summer months with large dependence on costly water tankers.

Around the year 2019 detailed engineering drawings of an extensive Rain Water Harvesting (RWH) system built by builder was serendipitously discovered. This system has been designed and built to harvest every drop of rain water falling inside the township plus water from a small monsoon-fed rivulet flowing along the boundary of the township. All the rain-water from terraces and open areas feed into a network of surface storm water drains, which in turn feeds into the RWH system.

The RWH system consists of 15-16 RWH Chambers (RWHC) each 2 meters by 2 meters wide and 4 meters deep. All the RWH chambers are linked from one to the next by concrete hume pipes ranging from 3 feet to 5 feet diameter, with water flowing under gravity from one end of the RWH system to the other, with the underground network meandering all through the township. The system is designed to only let the water which does not get harvested to flow into the adjoining lake, which in turn acts as a natural rain-water harvesting sink.  Enquiries with sources with builder revealed that the RWHCs have been built at sites where percolation was expected to be good as per soil testing carried out by them.

Our records showed that the entire RWH system had not been desilted for the last 12-14 years. A couple of attempts had been made in the past to get it desilted, but the work turned out to be both challenging and expensive and as such further action was abandoned.

There were various challenges in getting the RWH system desilted. First, was whether desilting was operationally feasible with many residents being of the opinion that it was not, since no one had much idea of exactly what was the actual layout like (all of it being deep underground). The second challenge was whether getting it desilted yield any positive results based on the futile attempts made earlier. That is, would the costs justify the results – increase in yield of our borewells. Third, there was also a strong feeling that once the harvested water percolated into the local aquifers, there was no way one could be sure that the water would benefit the borewells within the township, which would be a waste of both effort and money. It might help others but not us. Lastly, was finding competent contractors who could undertake this kind of specialised work.

After a lot of internal deliberation, it was decided to get only three of the RWHCs desilted on an experimental basis. As luck would have it, by this time the March 20 lock down took effect and finding any contractor willing to do this work became extremely difficult.

Incidentally, of the many contractors we contacted, one turned out to be the consultant who had advised us to get new RWH systems constructed (mark you this firm has quite a reputation in handling RWH projects in the local market). When we questioned him as to why he had advised us to get fresh structures constructed when desilting of existing structures would have been much cheaper and hopefully more effective, he gave some evasive responses and then promptly disappeared. It was obvious that the option he gave us would have much better margins for him – he had a perverse incentive in giving wrong advice while we lacked the knowhow to discern this.

We then turned lucky and found a contractor who was willing to do the desilting work. He lacked sophistication but more than made up for it through his practical and earthy approach. In this way we were able to get three of the RWHC desilted (2020-21) and in the process understood the intricacies and challenges of the work. The work consisted of basically sending labourers down into the RWHCs and physically removing the silt from them and the connecting pipes, and then disposing the silt. The silt removed was used to fill up some low-lying areas in the township. What we did find was that the entire RWH system was virtually choked with silt and a total of around 750 cft of silt was removed from just three RWHCs at a cost of about Rs.37,000.

The learnings from this experiment were, (a) the work could not be carried out during monsoon months since a humongous amounts of water flowed during this period. Ideally it should be carried out just after end of winter, say between January to March, (b) the underground channels were inhabited with snakes and other such creatures. This could be handled by lighting smoky fires inside the pipes and bursting crackers which drove away any snakes which were there.  (c) the biggest challenge (which turned out the easiest to resolve) was to locate the RWHCs since the whole area was built up and most of the openings were covered. The drawings indicated their existence, but locating the exact position was difficult. This is where our unsophisticated but earthy contractor showed his real worth. He arranged for one of his workers go down the underground connecting pipes from the one RWH chamber to the next and after reaching the next he would bang on the cover from beneath with his pick-axe. This way we were able to easily locate all the RWH chambers. The connecting pipes being of around 3 to 5 feet diameter it was not difficult for the workmen to move underground from one RWHC to the next.

With the knowledge gained in desilting three RWH chambers a comprehensive plan to desilt the entire system was drawn up and approval for required funds taken. The decision to get the desilting done was also supported by a very knowledgeable consultant, who advised that to maintain the effectiveness of any RWH structure, it should be regularly desilted. Ideally annually, but at least once every two years.

Finally, the entire system was comprehensively desilted during 2023-24 at a cost of Rs.4.40 lakhs and a total of over 4,500 cft of silt was removed. But the proof of the pudding is in eating it, and we were still not sure that desilting would improve yields of our borewells and by how much.

We then waited with our fingers and toes crossed, trying to avoid the snide comments of the nay-sayers, to see the effects of this exercise.

But our faith was rewarded. Starting end of 2024 (ie post monsoon) one by one some of our borewells which had gone completely dry started yielding water. We estimate that the value of water we drew from our borewells was more than Rs.30 lakhs during 2024-25. A pretty good return on investment of Rs.4.40 lakhs.

Encouraged by this, we next got the rest of our borewells surveyed and found that as many as 6-7 of them have substantial water yielding capacity. Due to long disuse these borewells had become dysfunctional and lacked pumps, pipes, electrical wiring etc. This is being addressed now, three borewells at a time. The challenge remains as to how permanent are the improvement in yields of these borewells and as such it is considered advisable to go forward with caution.

In future, we are planning to drill recharge borewells in the existing RWHCs to help recharge the local shallow aquifers so as to further improve the capacity and yield of our borewells. This is a low-lying fruit, since the entire structure for harvesting the rain-water is in place and functional. We just need to strengthen the water seepage capacity. Since presently we are not very sure on the cost-effectiveness and modalities of drilling recharge borewells, it is proposed to get 3-4 recharge borewells drilled every year at an annual cost of about Rs.2 lakhs and see its effects and slowly extend it to all the RWHCs.

The Ecological Implications.

The Deccan plateau is one of the oldest geological formations on earth and are approx. 3.5 billion years old. (The Himalayas in comparison are only about 72 million years old). Over this long period the rocks of this region have got much fractured due to both tectonic movement as well as through erosion / weathering. This is not to say that at various places there are massive sheet rocks. Due to this, nearly the entire underground shallow aquifers around Hyderabad has large water holding capacity. Water which has percolated down over millions of years. However, since we have been drawing out the ground water much faster over the last century than its percolation, the water table has been falling rapidly. This leads, over time, need to dig deeper borewells and it also costs much more to draw the ground water from these depths. At many places the shallow aquifers have gone totally dry. Moreover, the deeper we dig to draw out ground water, the worse the quality of water becomes due to contamination with nitrates, arsenic etc.

Furthermore, due to urbanisation and consequent covering of much of the land with buildings, asphalt, and concrete the natural percolation of rain-water has been greatly impeded. This gives a double whammy to recharge of the shallow aquifers. To start with we are drawing ground water faster than the percolation and moreover, the natural percolation is hindered.

Another adverse effect from the falling water table is the consequences on local flora and fauna. The native trees of the area have evolved over millions of years to have roots which go down to the existing water table. With rapidly falling water tables, the roots of native trees are unable to evolve fast enough to go deeper to reach the water table. This in turn results in slow emaciation of many of these trees which has started to manifest itself in the phenomenon of their shedding their leaves much earlier in the year than what they did even 10 years ago. An immediate effect of native trees dying out is that the insects and birds who survive in them are bereft of means of survival and this cycle inexorably impacts our own very survival.

Some Concluding Remarks

Availability of good quality water in adequate quantities and at low cost is essential for life to survive. History is full of examples wherein entire civilisations have collapsed due to paucity of water. Much closer temporally, we know that Akbar had to abandon his newly built grand capital Fatehpur Sikri due to lack of adequate water in that area.

Transporting large quantities of water over long distances is expensive and is hardly a viable solution. Such water may be used for specific uses, such as irrigation or supplying drinking water, but just cannot make up for the water the local flora and fauna are used to and have evolved on over millions of years, and thus its continued use adversely affects the local ecology. It is well known that use of canal water for irrigation over time increases salinity and reduces fertility of the soil. It is therefore essential for sustained development and progress to harvest and use local rain water effectively.

And our experience gives us much hope that it is simple, easy, and inexpensive way to nurture our ecology and ensure our own survival.      

In this adventure I initially faced much resistance from within my community as most people were skeptical and unconvinced on the effectiveness of the effort or the financial expenditure. It would not have reached its fruition without the unstinted support and advise of three of my neighbours and good freinds, Dr. Raghavendra Shivane, Mr. G V Prasad, and Mr. Uday Bhaskar. I am immeasurably indebted to all of them.

End of the day, it has been an exhilirating experience and an adventure. 

Home Town

“Now, please turn to the next form”, thundered Mr. Bannerjee. “You have to fill up details of your Home Town and Home Address in it”. Mr. Rathindra Kumar Bannerjee, a huge and extremely overbearing man, was the official from the Human Resources Department getting a whole sheaf of forms filled up by us, a group of fresh recruits joining one of the nationalized banks.

Everybody obediently started filling up his or her respective form. There was a little hubbub as some peaked to see his / her neighbour’s “Home Town”. Other than that, there was little confusion in the room as this seemed to be a fairly straightforward requirement, compared to the myriad forms we had been filling up in the post-lunch session of our first day of induction.

But this simple request from Mr. Banerjee left me quite perplexed. Meanwhile, Mr. Bannerjee kept on issuing a stream of interjections at a steady pace on the need for filling up this form, the considerations one should keep in mind in deciding on which place should be designated as the “Home Town”, and the implications this particular piece of bureaucratic record would have on our future bright career in the bank.

This seemingly simple requirement left me in profound dilemma. I ultimately very politely raised my hand and asked, “Sir, I do not have a Home Town. May I leave this form blank?” There suddenly was pin-drop silence in a room full of people with their heads fixed backwards, as everyone looked back (I was sitting in the last row as usual) to get a look at someone who asked such silly questions. Meanwhile, Mr. Bannerjee’s eyes popped out and he opened and closed his mouth wordlessly a couple of times.

“Well, your Home Town”, he finally managed to croak.

“But Sir, I do not have such a place which I could call as my Home Town”, I countered helplessly.

The fact being that there was no particular place I could call my “Home Town”. Strange as it may sound to most people, this was my case. I knew I was ethnically a Bihari but beyond that had no affinity to any place. I had lived all my life till then (and also subsequently) hopping around from place to place, from one town to another every two or three years. And so had my father and grandfather, both having been in transferable jobs. My grandfather had migrated from his native village (Village Kumbhaila, PO & Thana Piro, District Arrah) sometime early in the last century and rarely visited that place thereafter. The last time anyone from our immediate family had visited our ancestral village was over forty-five years prior to the date of this incident. I would later visit ‘my” village once, for a few hours, but that is another story.

Finally, after deep thought, Mr. Bannerjee asked me to fill up the place where my parents lived currently. This also failed to solve my predicament. My father was dead and my mother lived with my elder siblings, rotating from one to another. At that moment she was visiting my brother who had migrated to the US and settled there. Could I fill up as my “Home Town” a city in a country that I had never visited and had no connection whatsoever? 

Education & Employment

Prof. Gourishanker Hiremath, who teaches Economics at IIT Kharagpur, in his article in The Hindu (31/05/2025) has analysed and listed the issues relating to the employability factor of people passing out of our higher educational system. However, I am uncomfortable with his conclusions and recommendations.

Prof. Hiremath correctly counter-balances his observation that the growth in enrolment in University level courses, “suggests a dynamic academic landscape full of potential”, with the fact that the “degrees are proliferating faster than meaningful job opportunities”! This is indicative of the reality that our society is either not creating enough jobs or our educational system is failing in transforming our youth for the kinds of available employment opportunities. Due to this many of the jobless are trying to kill time and delay the stigma of being considered jobless by enrolling in university level courses ("postgraduate degrees and PhDs are frequently pursued not just for intellectual fulfilment but as a refuge from the job market"). At the same time industry spokespersons keep lamenting that they find it difficult to find suitable persons for entry level openings in their respective industries. 

The good professor goes on to mention that as per the Ministry of Statistics data, the unemployment rate tends to increase with higher education levels, which is indicative of the disconnect faced by millions of educated young people in translating their college degrees into productive and paying career opportunities. His take of this situation is that the way our higher education courses are designed and implemented emphasize rote learning over practical skills and the solution offered is to integrate practical skill modules in existing curriculum.    

As an economist I am sure that Prof. Hiremath would be familiar with the work of A. Michael Spence who examined the reasons as to why people spend so much time and money to acquire a college education. As per Spence they invariably do so because they want good jobs, since most job openings make a college degree the minimum requirement for the job.

Spence was awarded the Nobel Prize in Economics in 2001 based on an essay which he wrote in 1973. In this paper he explained why people spend so much time and money acquiring education. His theory is that employers have no way of easily finding out the skills and productivity of their prospective employees. Smart people acquire education because they want to send certain signals about their skills and productivity to their prospective employers. Employers who have no way of ascertaining the capabilities of the people they hire, in turn, look for precisely these signals.

Much before Spence wrote his celebrated essay, Ved Mehta published his book Fly and the Fly Bottle (1963) based on his interviews with a number of British philosophers. In course of his discussions, he enquired as to why do some of the brightest students study Philosophy at Oxford & Cambridge, and what kind of careers do they embark on. The insight he got was interesting. It seems that such students go on to become the best businessmen, the best politicians, and the best bureaucrats - very few become professional philosophers or academicians. The reason given was that study of philosophy helps in greatly training and sharpening the mind so that they are able to excel in any profession they chose. 

It is well known and acknowledged that university level education, irrespective of the subject studied, helps in developing critical thinking skills which can be widely applied in various areas of productive human endeavour. But such jobs are few in number. Even more pertinent, is whether widespread availability of critical thinking skills the need of our society and economy? Considering that our primary education system is in shambles and study after study have established that school level learning outcomes on the average are poor. 

About 25 years ago, I noticed that most of the graduates from BHU-IT were joining the IT industry, irrespective of their branch of specialisation – from metallurgy, to ceramic, civil, electrical & electronics, to computer science et al. I enquired from a very senior level IT professional as to the reasons for their preference to recruit engineering graduates for entry level positions. He started laughing and responded that it was not because of their technical skills but the fact it is easier to teach them coding. All new recruits were put to learning basic software development skills and absorbed only after successful completion of their training, which can last from six month or more. Those who could not come up to standards were let go (another reason for the high turnover in the IT industry - but hardly ever discussed or mentioned). There was no other way to evaluate the learnability factor of new recruits and our higher educational system was just not producing enough number of young people with skills required by the IT industry.  I am sure that the same situation persists even today.

Spence’s theory of market signals does not rule out that education increases skills, but it argues that most people do not acquire education to acquire additional skills. People who are inherently more capable and smart, acquire higher education so that they can show that they are smarter than others.

The criticism of Spence’s ideas is that if education is just a signal, it really is a very expensive and time consuming signal. Surely there should be cheaper ways of sending this signal! It also seems that the cost of these signals has been rising over time. For instance, certain jobs that were earlier available to people with high-school certificate are not open to them any longer - one has to be at least a graduate to apply for such jobs. So as per Spence’s theory, smart people have to spend more time and money to prove they are smart. Leading to a situation where a smart high school educated person cannot apply for that job, whereas a stupid college graduate persona can. Therefore, smart high school students make sure that they acquire a bachelor’s degree, otherwise no one will know how smart he or she is!

One solution to this seemingly impossible situation could be to have an all-India exam open to all who have passed their Class X or XII to ascertain their intelligence, aptitude, communication, numerical skills etc. Skills which an average university graduate is expected to attain. Anyone with a certain minimum cut-off score would be considered eligible for a job opening where a basic graduate degree is required. Or based on scores on different aspects, such as aptitude, communication or numerical skills, the industry can recruit them as trainees on a small stipend at a younger age bracket and confirm them as permanent employees after one to two years. Over this time, the worth and suitability of such trainees should become clear. Such a mechanism will not only save the humongous amounts of wastage of time, effort, and money spent by a large number of young people (and the government) trying to acquire a university degree, but also ensure a steady stream of suitable trainees for industry.