What's Behind the Financial Market Crisis?

Yesterday in India a top ranking investment analyst said : The economy will grow if more and more people buy cars, houses and spend on goods and services.  True, then these activities naturally grow contributing to growth of economy.  Pitfall here is that very few of such GAS (goods and services) preferred by FII will actually grow.  All the FII money will fall on shares of these companies and the share values also grow.  Stock Market improves.  Interested (interest minded) bankers devise ingenious ways to finance these.  This contributes to unnatural increase in prices and share values of these GAS.  At this time, a common investor comes in and invests. 

Someone in this, who has been making enormous gains, becomes greedy and throws caution to winds.  In US it is the sub-prime crisis.  In India, it was Ketan Parekh and Harshad Mehta.  They manupulate the markets. The bubble bursts. 

The lesson to be learnt is that there should be more of productive primary investment.  Opportunities for growth in a growing economy should be closer to the average if fundamentals are strong, for many more of these productive primary investment options.  Any obnormal exposure should be corrected.

How will this happen?  The entry barrier for listing is the culprit. Opportunities to tap the capital market for small and medium enterprises should increase.  Debt availability for these should also ilncrease.  The transition from debt to equity issues should be simpler.  Our banks should become development banking oriented. 

Earliler, banks had to lend to earn profits.  Now, look at this example.  I received a Mysore cheque from Syndicate Bank and I also have an account in the same branch.  All that I did is to deposit the cheque in a Bangalore branch.  Both branches are covered by CBS.  The operator simply opened the drawer's account and debited the cheque, while crediting proceeds to my account within two minutes.  I was charged Rs.250.00.  His reasoning is that it is an outstation cheque! Who am I?  Outstation customer?  Then what is CBS?

These opportunities for a banker has made him remain uninterested in lending.  For a SME,  it has become much more difficult to raise funds.  While these pillars are sufferring, apartment after apartment is coming up, funded by banks - with layers and layers of loans.  One day, value of these properties also come down.  And banks need to write off loans?!!

This is the second time today that I am calling for a Janardhan Poojary - this time, for productive primary investment (SME) loan mela.  With proper investment monitoring of course!