How Safe Are Our Savings With Our Banks?

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I had wanted to post the following article on Sunday the 24^th June, 2012. But I stopped posting it because I thought that it was inappropriate for me to unravel another issue of national concern, while the historic Wangdue Phodrang Dzong was ablaze.

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I routinely follow the Opposition Leader’s Blog (http://www.tsheringtobgay.com). Among the most recent posts are “Responsible Government?...” and “Trowa”. These two posts continue to generate some seriously trashy and indecent comments from the blog’s numerous followers but there are also some powerfully pertinent issues being raised, particularly by the likes of Sonam, ProOL, Jamyang, Guardian and others. The discussions that pertain to the past failures of Bhutan’s central bank, RMA to control the imprudent lending practices of the banks are particularly revealing.

In one of his comments, Jamyang writes; “As far as I am concerned, yes, the banks themselves decided into going for a complete ban for all new loan proposals from the day the RMA’s nonresident accounts closure notification came into effect”.

I was shocked by that comment. This is something totally contrary to what I had believed. It was my belief that:

a.     The ban was only on select sectors such as housing and vehicle; and

b.     The regulatory authority (RMA) ordered the suspension of the loans.

I had no idea that the total freeze on loans of all types is/was a decision of the banks themselves. If this is really true, then I am afraid that the problems may be even grimmer than I had thus far assumed.

We have to understand that the most fundamental and principal business plan of a bank is that it will accept deposits from people and institutions and lend out a large portion of it to people and businesses. They make their profits from the interest they earn from these loans they give out. Therefore, if a bank has to suspend lending, they cannot generate profits and if they cannot do that, they cannot pay interest on the deposits they have accepted from their depositors. They cannot accept fresh deposits because those deposits will be costly. Even worst, if a large number of their depositors decide to recall their deposits, they may run into serious liquidity problem.

There can only be one reason why the banks have stopped lending, of their own accord: they may have overstretched themselves to the point that they are dangerously outside the required reserve ratio set by the central bank. Or, they may have run out of cash!

Being overstretched is not so much a problem provided that all their loans are safe and secured. That majority of their loans are serviced in time and that there are no major defaults in loan repayments. But it can be a problem - if and when extraordinary events occur - such as if unusually large withdrawals take place at short notice. Then the balance is upset.

Such an extraordinary event did take place recently - as a result of the central bank’s order requiring the closure of all accounts held by nonresidents. Consequent upon that order, few hundred, possibly even thousand million in deposits belonging to nonresidents were withdrawn in a matter of days. That caused an enormous and dangerous dip in the banks’ available reserve funds, in the process, rendering all traditional calculations and assumptions meaningless. This meant that the banks now did not meet the central bank’s minimum required reserve ratio rule. Even more dangerous, it is possible that their overall lending now far outstripped their available reserve/deposits.

Have the banks endangered our hard-earned money as a result of their indiscipline and greed? Have they tied up our small savings in bad loans? Do they have enough reserves, as required by law, to pay us our money as and when we want to withdraw them? How safe is our money in their hands?

The sudden and complete freeze on lending by the banks is bad for the country’s economic and developmental activities. This is not only bad for ongoing activities but effectively halts new ones. The RMA cannot allow this. But the central bank has a problem - a problem of their own making.

What was the need for RMA to order the closure of the nonresidents’ accounts? It not only did not help curtail Rupee outflow, it aggravated it further. Additionally, it is the main culprit that triggered the flight of extraordinarily large amount of deposits that the banks needed to offset their lending.

To be fair, I believe that the central bank ordered the closure of the nonresidents accounts for a reason. And perhaps that reason is justified, given our compulsions. But now that the end has been achieved, the onus is on the RMA to restore normalcy.

There is no denying that the banks have been very, very irresponsible. They need to be disciplined. However, it is also true that the precariousness of their current state is, to a limited extent, caused by the RMA’s order requiring the closure of the nonresidents accounts. For that, the RMA has to assume part responsibility for the mess that the banks are in.

There is no point talking about what could have been. The situation needs to be corrected before it aggravates further. I think it is fair to assume that the banks’ problems go far beyond the need to remain within the stipulated minimum required reserve ratio rule.

I think they are completely broke!

I think the only answer is to restock the banks with cash immediately. RMA has to do it or, they have to go to the source at whose behest they ordered the closure of the nonresidents’ accounts and get them to bail the banks out.

Before I close, I have to ask two more questions:

Is it legal for nonresidents to open accounts in our banks? If not, how did it happen that the banks accepted their deposits?

What was the RMA’s rationale behind committing and delivering on the promise that all amounts withdrawn from the closed accounts of the nonresidents will be paid in Indian Rupees? These accounts were local currency accounts and, therefore, it is not obligatory on the part of the banks to pay off the nonresident depositors in foreign currency.

Something fishy?

Strange Coincidence?

-->A friend from New Delhi, India writes as follows, in response to my posts on the tragic loss of Wangdue Phodrang Dzong. When he mentions “yesterday”, he means 25^th June, 2012 - one day later than our own tragedy.

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Dear Yeshey,

Please accept our deepest sympathies over the loss of Wangdue Phodrang Dzong. Although Buddhism encourages non-attachment to material things, the loss of the immaterial things, the heritage and culture embodying almost four centuries of Bhutan's culture, will be the deepest blow.

For some reason such tragedies in the Himalayan region seem to be interlinked. In Srinagar, the shrine of Peer Dastageer Sahib, an 11th century saint, also burned to the ground yesterday. It was more than a century old, and one of the few places of peace in a deeply conflicted place.

It will hardly be a consolation that one hurt is matched by another, but I thought you may have liked to know.

With all our love,

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The Serene Face of Buddha

-->The nation is in mourning over the loss of Wangdue Phodrang Dzong, an edifice of great historical significance to Bhutan. No doubt a lot of hearts in Bhutan as well as around the world are experiencing a sense of emptiness at the realization that the Dzong is gone forever. Even if we rebuild another one on the same spot where it stood, it will never be the same.

I went through the collection of my photographs to see if there was anything that I could post on this blog to sooth and calm the minds of the readers. I chose the following photograph of Lord Buddha. I decided on it because there is a kind of detached serenity about the face that when I look at it, I experience a certain tranquility, a calmness that helps me forget, even if for a while, that over powering sense of loss.

The face of detachment: May be there is a lesson here

Wangdue Phodrang Dzong On Fire

About three hours ago or 5.30PM BST, I heard that the 374 years old Wangduephodrang Dzong was on fire. Even as I write this, I am told that the fire is blazing and sections of the Dzong’s structure are crumbling to dust every passing minute. It appears that it will be totally razed to the grounds. It is a depressing thought but I suspect that by tomorrow morning, there may be nothing left of the Dzong, except charred woodwork and the soot-covered partial remains of the Dzong’s stone walls.

It is an irreplaceable loss. Bhutan has lost one of its most iconic tangible heritage sites. My only hope is that the people had enough time to save some of the ancient Buddhist texts and priceless religious objects that were housed in the Dzong.

The Dzong was under renovation. I am told that the fire started around 4PM from the temporary sawmill installed for processing timber for the Dzong’s renovation.

I photographed the historic Dzong about seven months back

There cannot be more calamitous news than the news that the Dzong has been wiped out without a trace. With the Dzong was entwined nearly four hundred years of Bhutanese history; her trails and tribulations. It had borne witness to Bhutan’s painful march from a primitive feudal state to a peaceful and progressive Kingdom under a stable monarchy. For the country, the loss represents a colossal decline in our cultural wealth. Wangduephodrang’s landscape will never be the same again.

I am going to feel terribly sad when I next pass the Wangdue bridge because that hillock on top of which the Dzong stood is going to look so terribly empty.

I will miss the Dzong. 

UPDATE:
There is encouraging news. The priceless artifacts have been not been lost because they were relocated and stored elsewhere since the Dzong was under renovation.

As of now, no loss of life has been reported.

Without the Dzong, Wangdue Phodrang will never look the same ever again. As my contribution to posterity, I herewith allow everyone of my readers who visit my blog to FREELY download the above image. You may never get an image of Wangdue Phodrang looking like this ever again. The landscape of Wangdue remains altered for eternity! 

It seems like the news has spread around the world. As of now, my blog is being read  by readers from following countries:

Countreis     10PM Sun    5.50AM Mon

Bhutan                   31                         121

United States       28                      1,352

UK                          13                         214

India                        8                           22

Singapore                6                            6

Australia                 6                           37

Nepal                       4                             4

Canada                    2                         315

Thailand                 2                             2

Afghanistan           1                              1

Germany              66                           69

Netherlands         42                          42

Sweden                 23                           23

Denmark              19                            21
Japan                      0                              9
New Zealand         0                              7 
Spain                      0                              5

Bhutan declares 25.06.2012 as a day of mourning. Offices will remain closed.

Punasangchu In Spate

-->Something urgent had come up and so I had to cut short my trip to the South and return to Thimphu yesterday.

As I drove up the Tsirang-Wangdue road, I noticed that the Punasangchu had swollen and its color was a thick murky chocolate. It was strewn with debris consisting of whole trees and driftwood that it smashed against huge boulders in its path. The roar was deafening and as it seethed and frothed through the ravine, I was reminded of nature’s humbling power.

Nature's wrath

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When I reached Wangdue, I noticed that there were lots of people by the river bank - picking up dead or dying fish:

People collecting fish below Wangduephodrang Dzong

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Those of you who can differentiate fish would realize that all the fish in the hands of these people shown above are Yue-Nga or local fish, except the one in the left hand of the person wearing white shirt and crouching in the river. That one is brown trout.

Is this proof that the trout species are lot more resilient than our local fish breed?

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Floods are bad for aquatic life and in its wake it causes havoc to the life form living in the rivers. But if there is one thing I learnt in all my years on this earth, I have learnt that there is a pattern to nature’s madness. Nothing happens by chance. If it destroys something, it does so because it wants to foster something else.

Here Is Something Different

-->Just to prove that I am not only about birds, here are some photos that you might enjoy.

I am posting these images because I believe that I am among the very few lucky ones in Bhutan who has the opportunity to enjoy the outdoors. The outdoors is filled with such breathtaking beauty and color and the variety of life form one sees is simply mind boggling. They come in all shapes and sizes – but something I know that is common among all that plethora is that each minuscule one of them play a part in the perpetuation of life on this planet - those of ours as well as their own.

Seeing these creatures magnified through the lenses of my camera makes me understand why saving the environment is critical.

The following are three of the butterflies I photographed this trip. I not only love their own colors but the colors that surround them. Sometimes it is not the subject itself but the ambiance that make the picture.

As I was scanning the tops of flowering cluster of plants, I became aware of something crawling on the flowers. I noticed that it was a bee or bug ... but I was taken up by its colors. They were so powerful and vivid. So I let the butterflies go for a while and concentrated on the bug. I wish I could photograph it with a macro lens ... but that was not a possibility since it is way beyond my reach. So I used a telephoto instead. Still, I dare say that the details are admirable :)

As I continued to wait for butterflies to come in for their morning feed, I noticed this strangely shaped grasshopper. A gangly fellow. Notice his extraordinarily long limbs and even longer antennae.

Then comes along a strange looking lizard. But I love that strong color on his nut. Nature paints its creatures with such beautiful colors. Humans are no match.

Have I Been Witness To An Act of Bird Compassion?

-->I am currently in the South - shooting birds and butterflies. It is raining so the days are not as productive or as enjoyable. When it is not raining, it is hot and muggy. And, when it is not raining or not hot and muggy, it is windy. So, in a nutshell, yours truly is having a shitty time.

Anyway, wallowing in self-pity is not my style. I need to think of something to keep myself occupied or I will go nuts. But what does one do in the middle of nowhere? One thing I can do - since I am camped in the vicinity of Dagana road, I can head towards Dagana and check out the place for its potential for birds and butterflies. Yes, that is what I am going to do.

As I drove up the incline after the Changchey bridge and headed towards the bend from where I would veer off to the right on the road leading to Dangana, I heard a clamor of bird calls - rather urgent kind of calls. I looked up just in time to see two Ashy Drongos zipping away wildly in all directions. I ignored them and continued to drive towards Dagana. They are always cackling mindlessly, so nothing new there.

When I returned after about two hours later, I noticed that the Drongos were still perched on the same tree where I had earlier noticed them kicking up a huge racket. They were still kicking up a ruckus. That is rather unusual behavior for Drongos; it is unusual behavior for any bird to be in the same spot for two hours, except for Herons who are known to stand motionless in one spot for upto three hours.

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The Drongos were still sending out repeated shrill calls and making dashing and haphazard flights - but never leaving the tree they were perched on. Then I noticed. Perched on one of the branches was a juvenile Drongo, sitting motionless.

A terrified juvenile Drongo refuses to move

I realized that the two Drongos were his parents and they were trying to coax him out of the shadows. I got the impression that this was his first outing - a maiden training flight. The experience must have been terrifying - the infant refused to take flight. He was rooted to the branch and no amount of cajoling by the parents was going to get him to leave the branch and take to air.

Mummy Drongo cackles away helplessly

The little fellow preened; he stretched and fluffed his wings from time to time but his claws remained firmly gripped to the tree branch.

 He is obviously bored and keeps preening but not flying!

After hours of being rooted to the branch he must have been hungry because after a while, he opened his mouth wide open, signaling for food. Mom refused to feed him.

 The little bugger is hungry and wants food but mummy dear wants him to fly first

He started to peck at the leaves but his beaks were so tender and not hard enough to make a scratch on the leaves, let alone shred them.

 The little fellow was so hungry, he started to nibble at the leaves

Dusk was approaching and the parents were frantic, from the sound of their calls. I wanted to stone the tree so that I could get the little bugger to move. I know that once he overcomes his initial fright, he should be OK and flying should come to him naturally. However, I know that my intervention is not a natural process of his training. So I watched on helplessly.

Then out of the blue, a two-pronged attack was launched on the little tyke – from the left by a Red Vented Bulbul and from the right by a Black-crested Bulbul. Spontaneously, the little fellow took flight and landed on a tree close to the one where he was perched. The senior Drongos followed him and landed close to him, forming a protective shield around him. That must have jarred the little fellow out of his stupor. But now he pranced around some more, fleeting from branch to branch. After a while, the three of them flew off to directions unknown.

Bulbuls to the rescue

The show was over and as I drove off towards my camp, I wondered if the Bulbuls were carnivorous? If they were not, why would they attack a helpless little juvenile? I concluded that these two Bulbuls must have seen their chance at a meal seeing how stricken the little fellow was.

That night as I lay on my cot inside the tent, a thought occurred to me. What if that attack by the two Bulbuls was not an attack to prey on the little fellow? After all, Bulbuls are not birds of prey. If that is not true, then the only explanation is that the Bulbuls knew that the only way to get the little bugger to fly was to fake an attack on it. It sure worked.

Could it be that the two Bulbuls were seasoned parents who may have been subjected to similar truants by their own offspring? We have heard of heartwarming acts of compassion and kindness among the animals in the wild.

I wonder if I had been a witness to one such act?

Pedestrians' Day: The Acid Test

-->Yesterday was Tuesday, another day of the celebration of the Pedestrians’ Day. I greeted its arrival with a child-like glee. I was waiting for it because, after the first day’s experience, there was something I needed to test out.

Last Tuesday, I had an appointment to meet Damcho Duba of the Ministry of Home Affairs whose office is located inside the Tashichho Dzong. As I wrote in my earlier post, since I would have had to be walking, I had worn my walking shoes. As a result, I could not gain entry into the Dzong since sneakers are not allowed inside the Dzongs. So I had called up Damcho Duba and told him that I would come and see him the next day.

As I was walking away from the Dzong, I noticed a couple of RBG johnnies in Gho walking into the Dzong - wearing ankle high, black boots. I wondered! Is it possible? An idea stuck me :)

I decided that I would not go and see Damcho Duba the next day but on coming Tuesday - yesterday - another Pedestrians’ Day. I had an idea I wanted to try out.

Early morning of yesterday, I put on my all-leather, ankle high Gore-Tex Zamberlan trekking boots and matching thick knee-length Swiss stockings bought from Sherab’s at the Changlam Plaza area. Exactly at 10.15AM, I climbed up the first flight of stairs of the mighty Tashichho Dzong through which I would gain entry into the courtyard of the Dzong and from there on into the office of Damcho Duba. There were about 6 policemen manning the entry gate. I was apprehensive but I gave no indication that I was nervous. I emptied my miscellaneous articles from inside my hemchu and into the plastic trays, to be run through the scanner. I walked in confidently through the scanning gate, retrieved my belongings from inside the plastic trays at the other end and wobbled up the second flight of stairs - all the while waiting for the restraining voice of one of the policemen to stop me from walking any further. Nothing! I had gained entry into the Dzong and the policemen did not object. I met Damcho Duba and after chatting him for a while, I departed, still apprehensive that the police personnel might yet raise objections on my way out. Still nothing!!

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As I walked further away away from the Dzong, I wondered if every one of the policemen had failed to notice that I was wearing a boot that they might qualify as “casual”. So, in order to be doubly re-assured that the boots were not infra-dig, I decided to undergo another acid test. I walked to the National Assembly Hall building across the river where the Parliament is currently in session. There were, at that time, 5 policemen manning the entry point. I repeated the process of emptying my hemchu’s contents into the plastic trays for scanning and confidently walked in through the scanning gate into the corridors leading to the offices. NOTHING!

No objection to the boots - I was not stopped for wearing inappropriate footwear. I sauntered off to the right and walked the long corridor with my boots’ rubber soles squeaking away over the freshly polished wooden floors.

I passed the test. Leather boots were welcome - even if they are trekking boots. So I will not be getting knock-knees walking long durations in dress shoes during the Pedestrians’ Day :)

I have to say this: If the policemen had asked me about the boots, I was going to tell them that I was wearing Swiss boots. Most Bhutanese people understand and accept Swiss boots - they have no understanding of what trekking boots are :)

To this day I have not understood why trekking/back-packing boots came to be called Swiss boots in Bhutan. Perhaps, it was the Swiss people who first brought this class of boots into Bhutan and thus, they were called Swiss Boots.