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Banking Reforms of Jonathan Garner of Morgan Stanley – How to Spur Earnings for Growth in India


Jonathan Garner is chief Asia and emerging markets strategist at Morgan Stanley. He commented that the Indian Finance Ministry should invest funds in non-bank lenders. This would help in fighting credit crunch along with transmitting lower policy rates.


Finance under Modi Administration:

Jonathan Garner mentioned at the brokerage of Annual India Summit in Mumbai. According to Garner, there are major problems on financial transmission mechanism, bank recapitalization, and reorientation. Additionally, there are banking requirements that have to be discussed for the continuous worthy growth cycle.


Jonathan Garner pointed out that the newly formed Modi administration should emphasize fixing financial matters. These include fixing the banking system and investing in funds for growth in India. Previously, these financial sectors were completely neglected.  


Financial Status of India:

Reserve Bank of India (RBI) has a monetary committee. The members of this committee have lowered the repo rate by 75 basis points since January 2019. The interest rates have remained unchanged even for the average borrower who has to pay back. In September 2018, there was a liquidity crunch in India’s Finance sector. It was reported by defaults namely Infrastructure Leasing & Financial Services.

Improvement of Indian Finances:

Jonathan Garner announced that 15-20% earnings growth in India can be expected. This would be possible only if there is a major clean-up in the Indian financial sector.  

It is quite obvious that macro solutions should be taken into consideration.  The public sector banks that are running should implement reforms to merge with state-run lenders. The change has to be made by the top management. Jonathan Garner stated that PSU or Public Sector banks should provide good public lending characteristics. It should be clarified if public sector banks would be allowed to compete with private banks


Comments after discussing the present situation in Central Bank of India:

This was reported after talking to two central banks in Asia at India and Indonesia.  The discussion shows that there would be a definite commencement of rate cuts. There are major issues based on transmission and mechanism in central banks in India. The Indian Financial Ministry is responsible for fixing these financial issues.


Till date, there is a persistent issue about public sector banking based on recapitalization and reorientation. These should be addressed soon and resolved efficiently. Thereafter, financial advisors should find ways of worthwhile growth cycles that would be continuous. Eventually, the earnings growth should be aimed for a broader market leading to broader economic growth.


Financial Planning for the future:

Financial problems are present even in countries with the most advanced economies. Most countries find it challenging to engage in financial projects with private sectors. For an instant, in India, the real estate is the most active private sector. Yet, funding construction and mortgage financing are carried out by creditworthy clients.


Influence of Private Sector in India:

Owners of two-wheeler vehicles borrowed money from the shadow banking sector. The shadow banking sector had risen with the downfall of the Indian Economy. Also, at that point in time, the banks belonging to the public sector refused to lend money. The public sector banks were following the macro solution along with reserves of India. These include the built-up for recapitalisation, and merge and change management. It was carried out to understand “what is” and “what is not” good for public lending. There is always been a perpetual summation of the problem in growth that has caused disappointment.

Influence of the Budget:

In India, the government emphasised on the overall environment. Also, the Indian Government depended on the private sector for both consumers and corporate. This strategy proved to help in the development of the country. The trade and tariff issues provided many potential benefits to the Indians. It has enhanced the supply of chain relocation. People have been engaged in industrial sectors namely mobile phone hand-held devices and textiles. After the latest budget, it is clear that there would be more spending infrastructure. There would be other industries and openings that would get relocations within the Indian subcontinent.  


The announcement of the budget is not the only part of financial issues. People are keen to find a budget that offers more infrastructure spending. Additionally, people are hopeful that more methods and measures would be present.  These should attract FDI and FII.


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