You gonna believe Moody's? or Kroll?

Moody's have been whining about India's potential banking problems and how the possibility of higher losses may impede the growth of public sector banks which may need many billions of dollars to grow.

While I agree with the sentiment, the way the press release is drafted suggests that the recommended strategy is to allow more foreign banking. The strategy of the RBI has been to allow private Indian banks to grow into the space by raising foreign money.

That strategy was derailed by ICICI bank's dumb assed forays into - you guessed it - Moodyland. Otherwise we would have seen a continued growth in Indian private sector banking.

While I would like to see a more competitive banking scenario I do not think that competitiveness will be fostered by more foreign banking - please cast an eye on East Europe and Latvia. Better to allow all the public banks to raise lots more money and essentially convert them to private banks as was done with ICICI, IDBI and Axis rather than to try and consolidate them into bigger public banks.

Whatever the solution (and the one that will come about will be uniquely Indian) I would never have thought of Moody's being a shill for, as we say in India, vested interests, before they were shown to by lying liars by the sub prime debacle.

Time for them to shuffle off the stage and make way for a new model.

I hope Kroll succeeds in his new venture.