RIGGED SYSTEM

Brazil's Finance Minister Guido Mantega said Brazil backed Lagarde because she vowed to continue raising the profile of emerging markets. "Our support is for her to be a manager not of Europe's problems but of the world's. We will be watching out for this from the first day," Mantega said at a regional trade meeting in Paraguay. In justifying why India had gone with Lagarde in the end, Indian Finance Minister Pranab Mukherjee told Reuters it was in part because it wanted to be part of the concensus that had formed around her. Speaking while on a visit to Washington, Mukherjee said the IMF's selection process should have been more transparent but he believed Lagarde was a worthy candidate. Arvind Subramanian, a senior fellow at the Peterson Institute in Washington, said emerging economies had missed a golden opportunity to force change at the IMF helm by failing to rally around Carstens or by putting up their own consensus Candidate. It is a rigged system that needs to change but ... The only reason the outcome didn't match what (developing nations) wanted was because emerging market countries did not grab the opportunity," Subramanian said. Global development group Oxfam said Lagarde's appointment was "farcical" and had damaged the credibility of the IMF. There were noises made about openness, but the decision was made before the candidates were interviewed," said Sarah Wynn-Williams, Oxfam's head of relations with the IMF and World Bank.

AAI Eyes Funds For Expansion

After the announcement of major fleet expansion by domestic airlines at the Paris Air Show, India's airport developer Airports Authority of India (AAI) is desperately seeking more funds to keep pace with the robust growth that is expected to take place in the sector in the next five years.

AAI has sought additional funding to keep pace with the fleet and traffic expansion expected in India over the next few years. AAI, which invested around Rs 1,200 crore in modernisation projects last year, is working on 14 greenfield airports in India, which have been granted in-principle approval. Airline companies from India have ordered one-third of the total airplane orders placed during the Paris Air Show last week, with IndiGo finalising orders for 180 jets and GoAir for 72 Airbus jets. Jet Airways has placed orders for 49 aircraft while low-cost carrier SpiceJet had signed a deal with Boeing to acquire 30 Boeing 737 at an estimated value of $2.7 billion. India's airlines have placed orders worth $40 billion, but aviation experts have pointed out that poor infrastructure, debt, high fuel taxes and rising interest rates would be disturbing for the airline industry in India. Last year, out of its total expenditure of Rs 2,700 crore, AAI spent Rs 1,200 crore on face-lifting of the non-metro airports. The AAI has already disclosed plans to borrow Rs 900 crore this year and Rs 800 crore next year to fund the upgradation of 10 non-metro airports out of the total 35 such airports. The AAI had raised about Rs 550 crore last year via bank loans and guarantees but was not allowed to issue bonds by the finance ministry. It is also exploring funding from the World Bank.

RBI Sets New Rules To Prevent Fraud

Money can corrupt a man's mind. If he sees too much of it floating around, he'd probably want to grab a handful of it. Take for instance the banking business. It's a place that's constantly dealing with huge sums of money. Think about the huge risks associated with it. It is no wonder that time and again banking frauds by rogue employees have led to major bank collapses. In India, just a few months back, the relationship manager at the Gurgaon branch of Citibank India was found to be involved in a multi-crore fraud. The risks will never go away. What one can do is build robust systems with effective controls and checks. Our esteemed central bank, the Reserve Bank of India (RBI) has chalked out new set of rules for banks that would help prevent frauds and irregularities. The RBI has directed banks to frame staff rotation and leave policies for employees working in sensitive areas of the banks such as the treasury department and also relationship managers handling the accounts of high-value clients. Staff rotation and leave policies are popular international practices that enable banks to keep a tab on the decisions taken and work handled by their employees. Such practices help create proper checks and act as deterrents against any wrongdoing that employees may be tempted to be part of. According to a notification by the RBI, these new rules have been introduced on the back of certain forensic studies at some banks due to the "occurrence of large value frauds or sharp increase in number of frauds at such banks". Additionally, the central bank has asked private and foreign banks to appoint chief of internal vigilance (CIV) officers. The responsibilities of these officers would be akin to those of chief vigilance officers in public sector banks. We believe that the RBI's move has been timely and will go a long way in strengthening the Indian banking system.