Archive for General

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 | October 24, 2015
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Discussions , Ideas and Opportunities

Over a number of years, I have been observing and also actively participating in the discussions concerning National and International issues covering a wide range of topics ranging form politics to economics to social to religion and so on .

What a collosal waste of time and energy !!! I think it is much much better to concentrate on our job in stead. One should Discuss and Debate briefly to keep sharpness and awareness alive .

The increasing exchanges of ideas and jokes over social sites speak volumes on disguised unemployment across the society . These social media provides a release mechnism to such intellectual energy which gets clogged. If not channelized in the right direction, it will result into large scale frustrations and decay . The social medias also will not be able to take the load.

I see a huge surplus of talent , un exploited . The opportunity is staring at us , only if we open our eyes

Category: General |
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 17, 2015
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Petrol Prices.. A relief , more to GOI Exchequer !!

The recent nose dive of the petroleum prices have surprised ( happily ) almost all of us . The experts have now come to a stable view that it is not just the lower demand due to slump in the world economy but there is also an over supply position from the producing nations leading to this steep and steady fall in petrol prices

Lower petrol prices would help in reducing the costs and inflationary pressure in the importing countries like India ..but the Indian government has preferred to smartly increase the excise duty on Petrol.. and has passed over only a marginal gain to the consumer. The full effect of the petrol price reduction thus is not passed over to the consumers and hence the pressure of inflation will not reduce to the full extent directly.Though the excise collection will enable the Government to check its deficit significantly and thereby control the inflation. In other words, the money supply will not rise due to lower deficits, thus controlling inflation.

These are the choices of the Macro Economists and they have played the game smartly.

But my concern is Simple like a common man. The Concern is… will the government reduce the excise when the petrol prices go up. Please keep in mind hat this is not a long term phenomena.. the prices will bounce back as soon as there are signs of recovery globally and the producers will than hit back with controlled production. A question like this need to be asked right now and a a soothing assurance from those in the Power need to be obtained. If this is not done, consumers will keep paying higher excise for a long long time.

Category: Finances, General, Political, Taxation |
admin | September 24, 2014
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Audit is not the Solution

Currently , after a long time, we are witnessing some debates and discussions on “Audits”.. thanks to some startling revelations by ex CAG, Mr . Vinod Rai. Reading his book, indeed was a pleasure for a professional auditor like me . The book set my thoughts rolling

There are broadly two types of “Wrong Doings” which are revealed

1… That the Revenues have been under recovered , which can lead to huge Undue Enrichment of Private sector entities, and
2… That there are Excessive, unjustifiable expenses, leading to huge Undue Enrichment of Individuals/ corporates

now , here is a “Heads I Win and Tails You Lose ” type of situation.

If you plug the loopholes in revenue collection, than the funds get exposed to undue spending from the Government exchequer ! There seems to be a game of “Catch Me If You Can”, going on against the Auditors , not only in Public Sector , but also in the Private Sector. This is really demoralizing and frustrating in deed.

so what do we gain ? We need to plug all loopholes . This takes us to the basic moral fabric of the society .Unless that is strengthened, even thousands of Vinod Rais will get frustrated .

Category: General, Uncategorized |
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