Banking still lures bright grads

Banks and bankers have getting bad publicity since the financial crisis. Many bankers have lost jobs. Bonuses are down. One would think that bright young grads would want to steer clear of banks. Apparently not, according to Andrew Hill. management editor of the FT. He writes that in St Gallen in Switzerland, the lure of banking persists:

Many of the young students who run the St Gallen Symposium in Switzerland, where Mr Noonan spoke, still have their sights set on the peaks of high finance. Senior bankers are ready to welcome them. “I think it will still be cool for young people to join banks and financial institutions,” Urs Rohner, chairman of Credit Suisse, declared during the same conference. “I think there’s a lot of potential there.”

And the attraction is not confined to St Gallen:

Careers advisers at another business school specialising in finance told me recently they were in despair at the number of graduates who refused to consider joining industrial companies and retained rosy expectations of what high finance offered. 

Hill would want the new recruits to do their bit to change the culture in banking:

But today’s highly intelligent graduates will only realise their potential and render themselves socially useful if they aim higher than mere monetary reward. Having learnt the banker’s trade, they must refuse to mimic their Praetorian predecessors. 

Sorry to sound cynical but his exhortation is unlikely to make much of a difference. Culture in a company is seldom created by new recruits. It is overwhelmingly the creation of people at the top. The best that new recruits can do is imbibe the culture as speedily as they can; if they attempt to change it, chances are they will be shown the door. As for the people at the top, their behaviour will not change because of moral exhortation or media criticism. It will change when regulators wield the big stick. Regulation and legislation alone can change the culture in banking in any meaningful way. 

Capital markets are no longer about capital

Apple has raised an enormous amount of capital- to hand back cash to shareholders. It is sitting on tonnes of cash, yet resorted to the capital market because repatriating cash to the US from other parts of the world would have been tax inefficient. This, says John Kay in an article in the  FT, "illustrates a paradox in the modern relationship between business and finance. Companies have never had so little need for capital nor so much engagement with capital markets.

The point about listing in the market is not to raise capital- knowledge-based businesses do not need to own a whole lot of assets and hence do not need large amounts of capital. Rather, listing on the exchange has to do with providing an exit route to investors or rewards to managers who own stock options: "corporate governance, not capital allocation, is the principal economic and social function of those capital markets.".

What does this mean for investment banks, one of whose main businesses, was raising capital for firms? It would mean loss of a significant stream of revenue. Another important stream, proprietary trading, is being whittled away by regulation. No wonder investment banks are losing their sheen, as reflected in market value to book value ratios.

Unusual appointment in the Indian media

Indians holding high positions in MNCs abroad no longer makes news. Foreigners holding similar positions in MNCs too does not make news. But foreigners holding high positions in Indian firms in India still makes news. The airline industry has opted for foreigners (for example, Jet Air) from time to time but I can't think of this being phenomenon being pervasive.

So it's interesting that Hindustan Times has appointed a South African as its Chief Editorial and Content Officer ( in itself a new designation in the Indian media). A foreigner determining editorial content- deciding how the news is to be played and, perhaps, what commentary is appropriate- would mean a completely new perspective on newspaper content. As somebody who welcomes newness, innovation and fresh perspective, I am inclined to believe that this is a positive development, no matter what the eventual outcome (in terms of commercial success) is. So, what do we expect next? A New York Times or Guardian journalist as editor of one of our English papers?

Judicial Accountability Bill

I was somehow under the impression that the proposed Judicial Standards and Accountability Bill would provide the necessary correctives to wrongdoing in the judiciary. I stand corrected after reading Pavan Varma's article in TOI recently. Varma highlights several infirmities in the proposed legislation:

First, the Oversight Committee proposed by it has no real powers except to pass on a complaint to another layer, namely the Complaints Scrutiny Panel. This scrutiny panel is to consist of three members, two of whom will be sitting judges of the same court as the judges against whom the complaints have been made, clearly an unfair and unworkable proposition.

Second, the composition or the modalities of the investigation team is undefined. Thirdly, the penalties are merely in the form of advisories or warnings or, at best, a recommendation of removal to the president. Fourthly, the Oversight Committee consists of the Attorney General (how can someone who regularly appears before judges, including possibly the one being investigated, take an objective stance on the accusations made). Fifthly, the Bill has no mention of a vital area of reform, viz, the procedure for the appointment of judges. Sixthly, the entire lower judiciary is kept out of the ambit of the Bill. And seventhly, the Bill evokes an atmosphere of total secrecy to proceedings, going so far as to exclude the operation of even the RTI.

There is, of course, the separate issue of appointment of judges. On this, a consensus seems to be emerging within the government and parliament that the matter cannot be left entirely to judges- nowhere in the world do judges appoint themselves.

More dissection of Rajat Gupta

Enough has been written about Rajat Gupta's quest for more wealth and how it brought about its downfall. (Gupta is now out on bail pending disposal of his appeal against his conviction). For those wanting  another blow by blow account of the events leading up to his conviction, here is one from the NYT:

http://nyti.ms/1095hqq

(Thanks to Rajive Chandra for the pointer)

Karnataka election verdict

A vote against corruption. A pro-Congress wave. An anti-BJP mandate. We have had much instant punditry since the Karnataka assembly election results came in. Much of it is not persuasive when one looks at the changes in share of the popular vote.The Congress vote share went up by just 1.8 percentage points over 2008. That of the BJP declined by 14 percentage points of which 10 percentage points went to the Yeddyurappa faction. This, of course, suggests that if the BJP can mend fences with Yeddyurappa, it can do better next time.

Also, as Vidya Subrahmanyam points out in the Hindu, the BJP's share of the vote in 2008 of 33.86% was less than the Congress' share of 34.76% but that did not prevent the BJP from getting the largest number of seats.

Splits and alliances, rather than issues of corruption and governance or even incumbency, appear to be the decisive factor, as in so many other elections.Who gets the alliance combination right may matter more ultimately in the general elections of 2014 than, say Raga versus Namo.

An independent CBI?

There is renewed clamour for an independent CBI in the wake of the Coalgate investigations and the government's attempts to vet reports submitted by the CBI to the Supreme Court. Every political party thinks the CBI is a handmaiden of the government of the day but days nothing to alter the situation when it is in power.

Many activists would like the CBI to be free from political supervision. Then, we will have professionals in the CBI bravely investigating the corrupt and prosecuting them. What a pathetic delusion ! Politicians are not a special breed in society. They are drawn from the same genetic pool as lawyers, doctors, chartered accountants, bureaucrats, policemen, corporate executives and academics. True, politics is a game at which one needs ruthlessness in order to succeed but the same is true of most other professions. Only, the stakes in politics may be higher.

Make the CBI independent and you will have a set of privileged officers with frightening powers and amenable to nobody in the executive. Absolute power, we know, corrupts absolutely.  The police force is apt to misuse its powers even when under the supervision of civilian and political authority.Think of what might be when it is totally freed from such supervision.

Prescriptions, such as those for an omnipotent Lok Pal or an independent CBI, fail to answer the crucial question: who will these bodies be accountable to? Parliament and political parties are accountable to the people. The bureaucracy and the police must be accountable to parliament and the political authority. Perhaps, it does not suffice to have political oversight, it must be supplemented by parliamentary oversight and independent external audits by a panel of eminent persons. But this is not the same as saying that agencies such as the CBI should be independent of the political authority.

Harish Khare, writing in the Hindu, underlines this point and also warns against judicial intervention in such matters:

Given the context of this political culture of suspicion and accusation, it would be tempting to judicially “liberate” the CBI. This can only produce an institutional disequilibrium of the most unhelpful kind. Any democratic society should be very suspicious of a policeman, however competent a professional he may be, with powers to determine political life and death. As it is, we have yet to evolve a code of conduct for an ever enlarging plethora of regulators and independent commissions. Everyone goes about hypocritically believing that we have found the magic formula to make honest appointments of honest individuals to such “institutions.” 

Once an appointment has been wangled, then it is entirely open to an incumbent to take a maximum or a minimal view of his or her brief. We are becoming wise to another aberration: the potential — and, in a few cases, the reality — of a corporate house suborning these so-called “independent” authorities. Before we succumb once again to the allurement of installing unelected gods as our saviours, let us just remember that it is easy to proclaim and grab “independence” but it is much more difficult a task to produce the requisite institutional culture, anchored in balance, fairness and rectitude. That balance can be produced and enforced only by democratic processes of accountability. This balance can neither be produced nor imposed by a court.

Excellence in professional firms

What is it that makes some professional firms stand out? The Economist reviews a book that has come out on the subject and highlights some of the points in the book. Firms covered include McKinsey, Goldman Sachs, Capital Asset Management, Mayo Clinic and Cravath, Swaine & Moore (a law firm).

Some of the factors identified ring true but are not terribly helpful as guides to action:

These (factors common to these firms) include leaders who devote their lives to serving their firm rather than enriching themselves (though that tended to follow naturally), a good sense of what motivates staff to get up early and work late and the ability to get individualistic professionals to function unusually well in teams.

Which is fine but what makes the leaders so devoted and how exactly do the firms get teams to be effective? Echo answers.

One point is striking. The firms are fanatical about recruiting the right person and spend enormous time in getting the recruitment process right with people all the way to partners getting involved:

Each McKinsey applicant can be interviewed eight times before being offered a job; at Goldman, twice that is not unheard of. At Capital a serious candidate is likely to be seen by 20 people, some more than once. Recruitment, these firms believe, is the start of a lifelong relationship. At the same time, Goldman and McKinsey also have a policy of helping their staff to find suitable work elsewhere, all in the expectation that they will eventually become loyal customers.

The point, however, is not just ensuring that recruits fit the firm's culture but having a certain culture in the first place and defining it explicitly. It all comes down to having the "right culture". And key elements in the culture are pride in the firm and ensuring that nothing short of excellence in performance (in terms of meeting the customer's requirements) will do.

Such a culture is invariably the work of a few dedicated founders and leaders. Their contribution lies not just in creating the culture but in disseminating it and ensuring that it is passed on- by getting the right recruits in .

Should governments spend even when debt is high?

We have been following the RR debate in these posts. The latest twist is a seeming softening in the RR position in a recent FT article.They suggest that a stimulus might still be worth it in the present situation of high debt provided it goes into infrastructure:

A higher borrowing trajectory is warranted, given weak demand and low interest rates, where governments can identify high-return infrastructure projects. Borrowing to finance productive infrastructure raises long-run potential growth, ultimately pulling debt ratios lower.

Government of India, please note. Here, the concern is not so much the debt to gdp ratio but high inflation and a high current account deficit. But if these two indicators are showing signs of coming under control, a case for public spending in infrastructure could arise. Let's face it: in the run-up to elections, private investment simply won't revive, so any impetus to growth can come only from public spending. Absent growth, all debt indicators will rise and pose risks of a rating downgrade.

RR also make a case for higher inflation as a way to bring debt under control:

One of us attracted considerable fire for suggesting moderately elevated inflation (say, 4-6 per cent for a few years) at the outset of the crisis. However, a once-in-75-year crisis is precisely the time when central banks should expend some credibility to take the edge off public and private debts, and to accelerate the process bringing down the real price of housing and real estate.

This point is also worth pondering in India. Our debt to gdp ratio has declined, contrary to trends elsewhere, thanks to high inflation. We need to bring inflation down to 6% or so but leaving it at that level should be ok. RBI seems to have accepted this de facto, but is yet to accept it de jure. The reality is that we do have a 'new normal' for inflation; might as well acknowledge it.

Breaking up large banks

This is one item that has been on the academic agenda, if not the political agenda, ever since the sub-prime crisis erupted. It hasn't gathered momentum because the 'how to' issues are not easy to tackle. Which parts of the universal banks to break up? Where are the buyers? And so on.

And yet one shareholder did pose the question at Citibank's annual meeting last week. FT's Lex comments:

Meantime, the US universal banks trade at discounts to some smaller, more focused peers on a price to tangible book basis. And break-up values seem attractive. CLSA, for example, puts a sum-of-the-parts valuation of $73 a share on Citi versus a market price of $47. 

Citi counters that it continues to shed non-core assets and it is cutting 11,000 jobs. But chairman Michael O’Neill says “dismembering [the bank] in an uneconomic way” would not be in the best interest of its shareholders. The likes of Citi, JPMorgan and Deutsche Bank argue that there are still real benefits to universal global banking. For now, the too-big-to-fail legislation does not seem to have much traction. Lobbyists are out in force. Still, if politics does not break up banks, then investor greed might – unless banks can boost their returns.

As Lex points out, legislation being discussed in the US Congress could give a push to the break up of large banks. Congress wants to raise capital requirements for large banks to 15% against the 10.5% proposed by Basel III. The US Fed is weighing in with a higher leverage requirement. than the 3% contemplated under Basel III. A UK regulator Andy Haldane has proposed  4-7%. 

Mind you, these are minimum requirements. Banks generally hold capital above the regulatory minimum. In India, the regulatory minimum of 11.5% will translate into a market expectation of 15-16% of capital. Banks would be wise to plan their capital requirements accordingly.

Jet-Etihad deal at Air India's expense?

Etihad's acquiring a stake in Jet Airways is intended to improve the balance sheet of Jet, which, like most airlines in India, has been incurring losses. For a variety of reasons, the Indian aviation sector is in the doldrums.  It is understood that infusion of cash is a condition for recovery. In the case of Air India, the government is footing the bill. For private carriers, there seems little alternative to FDI.

Fair enough. However, as former ED of Air India Jitender Bhargava argues in a hard-hitting article in BS, the Jet- Etihad deal appears to have come at the expense of Air India:

Though there was unanimity that the two airlines would stand to benefit enormously, the bitterness came owing to the sweetener added by the ministry of civil aviation by way of granting over 40,000 additional seats per week on the India-Abu Dhabi sector over a three-year period. These seats were given away at a time when India was witnessing negative growth. Where was the need for additional capacity?
This has led to a question: was the grant of additional seats factored in for Jet Airways to obtain a higher valuation compared to what was being discussed in January 2013? Given that the two announcements - stake sale and grant of additional seats - came within hours of each other, was an assurance on additional seats demanded by the airlines and given by the government before the pronouncement of stake sale? These are serious questions because, if the link can be established, it is not only akin to insider trading but also demonstrates how decisions can be forced out of the government by powerful individuals.

 
These are very serious questions. Perhaps, we need the CAG to look into this while auditing the ministry of civil aviation? While Jet gains from the largesse, Air India is the loser. Bhargava adds with biting sarcasm:

With the survival of Air India made still more difficult, let us welcome Jet Airways as the national carrier because it enjoys the patronage of the Government of India and has been given a head start!

---

More on the Reinhart- Rogoff paper

Martin Wolf, writing in the FT, has an interesting take on the public debt- growth thesis. He contends that high public debt is often the consequence of an explosion in private debt, He cites RR's book in support:

Indeed, in their masterpiece, This Time is Different, professors Reinhart and Rogoff explained how soaring private debt can lead to financial crises that generate deep recessions, weak recoveries and rising public debt. This work is seminal. Its conclusion is clearly that rising public debt is the consequence of the low growth, itself explained by the crisis. This is not to rule out two-way causality. But the impulse goes from private financial excesses to crisis, slow growth and high public debt, not the other way round. Just ask the Irish or Spanish about their experience. 

Wolf makes the point that what caused public debt to rise, in the first place, is important. Following a financial bust, a rise in public  debt is inevitable and necessary because otherwise the economy will plunge into a recession.

Wolf also points to an interesting historical fact. The UK had debt to GDP ratio of 240% in 1816.  The "economic disaster" that followed was the industrial revolution! Thereafter growth accelerated and the ratio declined to below 90% by 1860s. The colossal debt that UK had run was not even for productive activities, it was to finance a war! So much for the correlation between public debt and growth.

Database on graduate schools

I have received a link to a most useful database b-schools. It provides a wealth of information on MBA as well as Ph D programs. Here it is:

http://graduate-school.phds.org

Indian judiciary's finest hour

More than one newspaper has thought fit to recall, on its fortieth anniversary, the historic Kesavananda Bharati judgement delivered by the honourable Supreme Court. An article in the Hindu gives the background:

The Kesavananda Bharati case was the culmination of a serious conflict between the judiciary and the government, then headed by Mrs Indira Gandhi. In 1967, the Supreme Court took an extreme view, in the Golak Nath case, that Parliament could not amend or alter any fundamental right. Two years later, Indira Gandhi nationalised 14 major banks and the paltry compensation was made payable in bonds that matured after 10 years! This was struck down by the Supreme Court, although it upheld the right of Parliament to nationalise banks and other industries. A year later, in 1970, Mrs Gandhi abolished the Privy Purses. This was a constitutional betrayal of the solemn assurance given by Sardar Patel to all the erstwhile rulers. This was also struck down by the Supreme Court. Ironically, the abolition of the Privy Purses was challenged by the late Madhavrao Scindia, who later joined the Congress Party.

Smarting under three successive adverse rulings, which had all been argued by N.A. Palkhivala, Indira Gandhi was determined to cut the Supreme Court and the High Courts to size and she introduced a series of constitutional amendments that nullified the Golak Nath, Bank Nationalisation and Privy Purses judgments. In a nutshell, these amendments gave Parliament uncontrolled power to alter or even abolish any fundamental right.

The judgement in the Kesavananda Bharati case put the brakes on the amendment spree that parliament had embarked on . The Court ruled, by a narrow 7-5 verdict,  that parliament's amending power was limited by the "basic structure" the constitution. Different judges articulated what they meant by the "basic structure". However, in the very nature of things, this cannot be exhaustively defined. It is left to the Supreme Court to judge whether, in a given instance, the "basic structure" is disturbed.

As several legal experts have noted, there is, in the Constitution, no explicit bar on parliament's amending power: Article 368, which deals with parliaments' powers on this subject, does not impose any limitation. What, then, is the rationale for imposing a limitation? As I recall, the essence of the argument is that parliament itself is a creature of the Constitution and hence subordinate to it. Parliament cannot, therefore, act in ways that erode or undermine the "basic structure" of the Constitution.

Despite this judgement, the Supreme Court, during the emergency, did not strike down the suspension of the right to habeas corpus, which many would regard as fundamental to basic liberties of the citizen. It required a Constitutional amendment by parliament later to ensure that this right is not taken away during an emergency. One shudders to think of what might have been had the "basic structure" doctrine not been propounded by the Supreme Court. The author of the Hindu article is right in saying that this judgement saved Indian democracy.

Economists' fads and fashions

I had a post yesterday on the controversy over the Reinhart-Rogoff paper. Such controversies wouldn't be troubling if they remained strictly in the academic realm. The difficulty arises when some findings or prescriptions of economists are accepted and acted upon by policy-makers. These prescriptions, mind you, are often over-simplified versions of theory When the findings come to be questioned later, as has  happened with the RR paper, the costs of wrong policy fall on the hapless citizens of economies where these policies have been practised.

There is little doubt that austerity in the Eurozone has hurt millions badly. This would have been acceptable had there been light at the end of the tunnel. It does appear, however, that economic recovery is going to stretch out as austerity causes economies to contract. You can't blame RR alone for this.

The IMF, which has pushed for austerity in the bailout packages for Greece and others, disclosed last October that its estimate of the fiscal multiplier (of around 0.5) was an under-estimate. The multiplier may be higher than 1. This means that cuts in government spending will cause a reduction in gdp that is greater than the cut, so that debt to gdp rises, it doesn't fall! Now, who is going to pay for the IMF's turnabout? The people of the Eurozone, of course.

One can think of other prescriptions that have turned out to be dubious- capital account convertibility, opening up to foreign banks, privatisation, efficient markets and 'light-touch' regulation.... it's a long list. Policy makers must be careful not to fall for passing fads and fashion amongst economists. They must allow policy always to be mediated by the democratic process, so that they have a better understanding of how policy impacts on the lives and aspirations of people.

More in Hindu article, Beware the nostrums of economists.

Public debt and growth

Many readers will be aware of the first class controversy that is raging in the economist fraternity over a paper written by Reinhart and Rogoff  (RR)on the relationship between public debt and growth. In a nutshell, the paper purported to show that growth falls off a cliff once the public debt to gdp ration crosses 90%. Three economists at Massachussets, Amherst have shown that the calculations underlying the paper were flawed: the impact on growth at that level of debt is far less lethal than RR made it out to be.

FT has several interesting posts on the subject. Here is a sample: One, two and three

Students of economists should know, from first principles, that there was more than an element of exaggeration in the RR thesis. Think of why higher debt should hurt growth. As governments raise borrowings, there is crowding out of private investment through higher interest rates. But in an open economy where savings from outside the economy can be tapped, this effect will be far less severe than in a closed economy.

Secondly, much depends on what your borrow for. If higher government borrowing goes into infrastructure or even human capital, it could "crowd in " private investment.

Lastly, when the economy is way below full employment, government borrowing helps move output towards the equilibrium level; it is when an economy close to full employment that the deleterious effects of government borrowing are felt. When governments cut back on borrowings by cutting government spending at a time when economies are mired in recession, you get what we are seeing in the Eurozone today.

Women at work

How women can advance at the workplace is one of the recurrent themes in discussions on gender equality and management. Sheryl Sandberg, COO of Facebook, weighed into this debate with  a book that advised women to "lean in"- be more vocal and demanding at the workplace. The Economist reviews a clutch of three books that shed more light on this subject.

One point the review highlights is the differences in how men and women respond to situations at the workplace:

Women ask more questions, gather more people’s opinions and seek collaboration with co-workers more frequently than men. Men view these preferences as signs of weakness, and women, in turn, grow annoyed by how competitively men work, and how quickly and unilaterally they arrive at conclusions.

But this doesn't explain why women do not rise as much in the corporate world as men do. To put it all down to gender discrimination is a lazy explanation. Women opting out to look after children or opting for a certain career path in order to balance work and family are part of the explanation; it could also be that not enough women opt for professional degrees (such as engineering) that are required for rapid progression.

What we can say with a measure of confidence is that firms lose our when they do not have adequate gender diversity at various levels. And it may well be that to achieve a certain diversity along the line, you need to begin at the very top: representation for women on boards. European countries that have mandated minimum seats for women on boards seem to have got it right. The improvement in the lot of particular groups just does not happen in society unless there is a measure of affirmative action.

Modi's biographer on Narendra Modi

Nilanjan Mukopadhyay, author of a biography of Narendra Modi, interviewed by Rediff.com

Analytics and recruitment of employees

Analytics- or crunching of data on a large scale-is being widely used for a variety of purposes. The Economist has an interesting report on the use of analytics for hiring employees.

Some of the findings on employee performance, which helps in taking decisions on recruitment, are interesting:

• ....people who fill out online job applications using browsers that did not come with the computer (such as Microsoft’s Internet Explorer on a Windows PC) but had to be deliberately installed (like Firefox or Google’s Chrome) perform better and change jobs less often.
•  ....one of the best predictors that a customer-service employee will stick with a job is that he lives nearby and can get to work easily. These and other findings helped Xerox cut attrition by a fifth in a pilot programme that has since been extended. It also found that workers who had joined one or two social networks tended to stay in a job for longer. Those who belonged to four or more social networks did not.
• A study of 20,000 workers showed that more honest people tend to perform better and stay at the job longer. For some reason, however, they make less effective salespeople.

I don't suppose such findings can be a substitute for going through applications and interviewing candidates. But they can be an aid to good hiring, especially when backed by firm-specific data. 

And now China gets rating downgrade

China may be growing at 8% but that hasn't stopped Fitch from downgrading it from AA- to A+, FT reports.:

Fitch downgraded China’s long-term local currency rating from AA- to A+, citing a number of “underlying structural weaknesses” in the Chinese economy including low average incomes, lagging standards of governance, and a rapid expansion of credit. 

The agency also warned of the growing risks from the rise of shadow banking, and said that total credit in China may have reached 198 per cent of gross domestic product by the end of last year, up from 125 per cent in 2008. 

“Ultimately we think China’s debt problem is going to require sovereign resources to resolve and debt will migrate onto China’s sovereign balance sheet. We don’t yet know what form this will take – central bailouts of local governments or of banks, perhaps”, said Andrew Colquhoun, head of Asia sovereign ratings at Fitch.  

The downgrade does not come entirely a surprise. There has long been a perception that China's public debt is understated, partly because debt raised by provincial and other agencies are not included, but mainly because China uses state-owned banks to lend in a big way to state-owned enterprises and public projects. In effect, this buries public debt in banks' balance sheets. When balance sheets are growing rapidly, the NPA/ asset  ratio stays low, again disguising the underlying problem.

The rapid expansion in credit as a percentage of GDP, however, is unlikely to leave Chinese banks unsinged. As Fitch points out correctly, this will ultimately require sovereign bail-outs and an increase in public debt.

China's high leverage coincides with signs that the chances of growth slowing down sharply are rising. Martin Wolf quotes a Chinese agency as forecasting a slowing down of growth to 6.5% between 2018 and 2022, compared to growth of 10% from 2000 to 2010.This again points to a rise in NPAs in banks. The big question is whether the transition to slower growth will be smooth or disorderly.