Archive for Finances

admin | March 2, 2016
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Lessons From A Union Budget !

A Union Budget in India is one of the most debated Subject. It is so healthy to note that the attention of the intellectuals is , at least temporarily, diverted to some issues faced by the nation . We need more and more of such debates and interactions with those who govern us .

No matter how strongly we criticize the Governments, it remains a fact that year after year, they do come out with the budgets where in the Actual performance is also compared with the originally budgeted and revised Estimates. May I know, how seriously this is being done even in the private and personal sectors ? My gut feel is, the private and family pwned businesses in India fall pitiably short of our expectations when it comes to budgeting and transparency .There are some good points to learn even from Public sector, which has strictly followed this tradition left by the much criticized British Raaj !

Category: Finances, General | Tags: ,
admin | February 24, 2016
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Budget Expectations

The Budget Fever is picking up for the Budget 2016.
We all have read and heard many opinions and expectations .
Details apart, the following is quite visible and desirable

SWEETNERS

1… Reduce the burden of tax of common man by enhacing the exemption limit
2… Provide addition in ceiling of Sec 80C to provide incentive towards savings
3… The Exemption limit and 80C limits be made inflation adjustible henceforth
4…Enhance HRA, Edu Allo, Hosing loan interest etc deductions
5… Make Pension schemes more attractive
6… No TDS on Interest income from Banks upto Rs 50,000 pa
7… Withdraw in phases, the additional depreciation and similar incentives
8… Simplifications in Transfer pricing and normal assessment procedures
9… Reduce the Corporate rate of taxation

BITTER

1… Increase in Service Tax on certain services
2… Enhancing Wealth Tax and reintroduction of Estate Duty

GENERAL

Various Rural Schemes will be announced . NAREGA will be streamlined. Strict action against defaulting borrowers( NPA) will be announced

On the whole it will be a consumer oriented budget, giving higher purchasing power . The dependance on market borrowing and PPP will enhace substentially

NOW, LET’S Wait and Watch

Category: Finances, Taxation |
admin | February 17, 2016
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The NPA Volcano

I feel RBI deserves full credit for digging the surface of the NPA Volcano before it is too late. We as a nation and I in my individual capacity should be and are proud of their action.

A lot is being talked about NPA and therefore I prefer to be brief and to the point.

1. There is a need to redefine and large and willful defaulters. Their wings have to be curtailed. Some of the ways of curtailing or disciplining them can be :

a) Appointment of auditors should be by consortium of lenders. They should be provided additional special terms of reference.

b) The majority in the Board in no case should be with thedefaulting promoters’ group. Even without holding majority in the Board, the promoters can and should run the unit well within the permissible limit.

c) If, the above fails to remedy the situation, the management should be completely taken over and for that matter, out banking system will have to create a pool of professionals and other promoters with proven track record.

2. Over a long period of my career as a professional CA and with the experience of being professional independent director in one of the nationalised banks, I have seen that the name of the ‘consultant’, ‘adviser’ etc functionaries who peddled the Loan is not referred to in the files once the loan is disbursed and turns into NPA. In fact, there should be a directory of consultants etc. who have played a role during the relevant period.I am sure a clear track will emerge.

3. We need to bring in an element of incentive towards the loan which did not get converted in to NPA. The bank officers responsible and associated with such accounts and also the Borrowers need to be given incentives.

4. A time has come to have a relook at the constitution of the boards of the nationalized banks.Too much presence of Controlling authorities bring an element of undue influence as well.

5. As a practitioner, at BIFR, I also observed the tremendous delays in settling ( if at all it is settled ) a bad loan. The entire legal structure and the legal system needs to be re looked. Mere changing of law ( as envisaged in the amended Companies Act 2013 ) will not be adequate. The parties and institutions involved in delivery of justice needs a closer look. This includes the role and manning of DRTs, ARCs , Legal and other professional fraternities’.

These are some stray observations, but the fact remains that in the Banking Sector a major operation is required.If defaulting promoters are allowed to get away with Restructuring the Loan portfolios and Banks are saved through Injunction of more Capital what I fear is that there would be an indirect incentive for a willful defaulter to first commit a default and then take the bonanza of large scale write-offs and settle it.

Even the banks appear to be in a mood to declare a huge NPAs so that more capitalization is justified.

I am sure the readers will appreciate what I’m trying to point out.

Category: Finances, General, Uncategorized |
admin | August 19, 2015
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The Chinese Way of working out ROI and the Start Up Valuation

Over a period of time the world is wondering as to the justification that the Chinese planners have while investing in huge( rather wild shot ) infra investments . A similar set of questions do crop up when we see the mind boggling valuations that are placed on the newly start up e business ventures , particularly in distribution and marketing e businesses .

The questions and dis belief is based upon a strong belief in the existing set of the parametres of evaluating an investment decision and if you view these valuations and investment decisions from your existing set of norms and standards, you will never find them attractive and will find them crazy!

For instance, China views political and strategic advantages as a part of returns and thus places a long investment period to evaluate and justify its viability. The period that they seem to have is much much beyond the standard 10 to 15 years . They also view the jobs created in domestic market and its fall outs as well as boost in trade and commerce, political strong hold etc as a part of their returns. Than only the setting up of an entire city on a foregn land or building roads over the Himalayas can be justified. Their way of understanding and managing Macro Economics need to be studied more carefully in order to know our competitor.

As far as the new found crazy valuations of e retail businesses are concerned, the investors also know that such high valuations are not to be justified in a short run. They are also not naive to believe that there is a near certainty of someone offering them a better price in near future.

What they seem to be aiming at is a strong foothold over the market that these companies cater to, the criticality of the market that they cater to and the real estate investment that they need to make to be in the market place . The pre requisite for keeping such criterias for justifying the investment decisions is to have a very very long time frame for justifying the investment. It is clear that they too have a really a very long time horizon to evaluate their investments.

Who these investors really are, is a matter of guess and my guess will be as good or as bad as yours !!

Category: Finances, General, Political |
admin | January 18, 2015
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RBI V/S NPA

This is a constant struggle that one is viewing almost ever since the lending started.”The major risk that the borrower takes the risk of losing his capital ” is something that we all understand. Similarly, the Lender also takes a risk of losing its principal and interest thereon, if and when the things go bad.That’s the way a balance is struck and the business of lending goes on and prospers.

The issue that RBI Governor Mr Rajan has raised is that there are many borrowers who either willfully default or do not try hard enough to honour their commitments to the lender. These are the borrowers who want the lenders to suffer and sacrifice first.This attitude is the point that irritates the lenders. To follow good etics is the bare minimum that should be expected and if found wanting, due and strict actions should not be delayed.

However, at the same time, the lenders too need to improve their quality of lending and monitoring. Timely identification of a likely default situation , continuing monitoring even when the going is good, extending a helping hand when needed re some of the things which are wellknown, well talked about but scarcely practiced.The situation of an NPA is so much scarry to the lenders that many a times they jump on a agreeing to debt restructuring proposal or putting excessive pressure of recovery leading to a stand off and precipitate NPA.

I feel there is a need to look at the issue of reducing NPAs at a holistic level and come out with some innovative plan of action Otherwise “Smart” promotors will keep on playing the game of ” Heads I win and Tails you Lose “.

Category: Finances |
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