r basant roi : improving loans quality in mauritius address by mr r basant roi, governor of the bank of mauritius, at the opening of ioib branch, curepipe, 25 may 2006. * * * hon. deputy prime minister and minister of finance and economic development chairman of the board of directors and chief executive of ioib ladies and gentlemen good afternoon i am extremely happy to be here with you on this special occasion marking the opening of the curepipe branch of the ioib. may i, to begin with, express my personal appreciation to the board of directors of the ioib and the sbi team for having successfully met the various challenges that confronted them at the time of the take over of the bank last year. the new management of the bank was faced with the task of putting in place a robust policy framework including solid internal control systems and procedures and filling gaps in the overall management structure of the bank. declining level of deposits, advances and profitability, skewed asset level with low yielding investments accounting for more than 60 per cent of the asset book, high cost of funds with fixed deposits accounting for over 65 per cent of total deposits, absence of investment friendly products, extremely high level of non - performing assets and total absence of any system of target setting and performance review. these were conditions in which the bank was operating in the very recent past. worst, a constellation of obscure forces, known only to a few, militated against those who were really determined to bring the bank to safe haven. the regulator and a few faithful board members of the bank sailed against the strong wind. i am personally very happy to see that the board of directors of the bank and the sbi team have brought about a dramatic improvement in the balance sheet of the bank in the first year of its operation. on an annual basis, the deposit base of the bank grew by 21 per cent, advances by 55 per cent and its total assets by 50 per cent. profit before tax rs34 million ; profit after tax rs24 million. the ratio of gross npa to gross advances fell from nearly 27 per cent in june 2005 to nearly 17 per cent in march 2006 – that is, by 10 percentage points. the ratio of net npa to net advances has fallen from 16 per cent to 9 per cent and is expected to go down to around 3 per cent by march 2007. without an iota of doubt, this is really an impressive performance. i have found it appropriate to mention these figures for

they were 9 - 12. long gone are those days of saturday banking. trousers for women were banned ; no married women were recruited to any bank in mauritius and when a girl on the staff announced her marriage, she was forced to resign. this rule was only revoked in 1974 after continued protests, and by a special edict from the prime minister ’ s office ; but women who came back had either to repay the compensation they had received on their early departure, or lose seniority. that was a different world that we must document before the passage of time buries these secrets of the past from our collective memory. if i refrain from elaborating on the history now, let me make two points about monetary policy and investment. economists are commonly expected to have a position on macroeconomic matters derived from theory covering monetary policy and practice as a basis for shaping advice on decision - making. these theoretical principles may derive from the 18th century classical economics of the free market, the neo - classical developments of the late 19th century alfred marshall 19, from john maynard keynes ’ postulates for promoting fullemployment in the post - depression era, the post - keynes developments by nicholas kaldor 20 and his colleagues, to respond to the challenges of wage inflation, from the modernist positions of milton friedman 21 to control money supply, and from even the post - modernist evidence - based approaches of jeffrey sachs 22. it was sachs, one of today ’ s “ big shots ” in alfred marshall, ( 1842 - 1924 ), british economist, noted for his 1890 publication “ principles of economics ”. nicholas kaldor, ( 1908 - 1986 ), british economist. his works on macro - economics had a major impact on the application of economic theory to government policies of western countries. milton friedman, ( 1912 - 2006 ), nobel prize winner in economics, noted for advocating the free market system and monetarism. jeffrey sachs, ( 1954 - ), director of the earth institute and professor of sustainable development at colombia university, usa. macro - economics, who at a stroke put the brakes on hyperinflation in bolivia in the 1980 ’ s. each of these iconic scholars represents schools of thought which to the outsider have something of the appearance of coteries or clubs of isolated sects. now on such matters of economics schools, clubs and theories i tend to keep an open mind, without going to the extreme position of my friend marx … groucho 23 of course! he once famously declared