Good evening all !!
Well .. though, I concede, as all anticipations and conjectures would have prognosticated, all March scribbles would be demonstrating a close theme proximity with – fiscal bills, provisions, deficits, legal implications of bills, etc – being in the vicinity of February 29, I have been prompted to pursue an aberration !!
May I :)
Inadvertent its been, though, however, inadvertent perusal of certain obnoxious fiscal developments prompted the ingrained investment banker / blogger in me – to dedicate a scribble on NPAs, public sector banking institutions, their redundant non vigilant diligence systems, consequent exasperating erosion of value of our public capital etc crucial issues – which, though extremely crucial for the economy as a whole, however, inferring from current economic scenario, it is (perturbing) apparently residing in oblivion cache of policy-makers. Blunder-some ! Or deliberate ??
Its indeed not at all a discovery that the financial / banking sector, in any economy, is an extremely crucial barometer, as well as synonymous, of growth meter and well-being of the economy ! The synopsis of activity, balance sheets, state of affairs and consequent health of banking, financial system of any economy – indicates the rate, well-being, acceleration or impediments in the economic growth or economic activity or consequent demand or slowdown – in any jurisdiction of the world !! The whole vicious circle of credit, economic activity, return, all initiate from financial institutions.
However, despite the aforesaid significance, & especially the deployment of public capital in incorporated public sector financial institutions, it is perturbing to be a passive spectator to perturbing developments in this crucial sector, NPAs, lack of diligence evaluation systems, seemingly political interference in management, not incorporating enhanced fiscal prudence review systems / controls to ensure a prudent vigilant culture / decision systems in the sector.
Solicit perusal of the perturbing developments :
Twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years. – Indian Express
Aforesaid grossly perilous, obnoxious figures ought to have rendered persistent jolts, and shoved off – even the most complacent unprofessionally vigilant economic financial reporting system – if at all – persisting in Indian economic system !!
Well .. aforesaid perturbing obnoxious figures would have indeed jolted & shoved off any prudent responsible policymaker – to dwell inside and seek answers – as to existence of any REAL prudence / diligence / review systems – AT ALL IN PLACE ??
Perplexed at audacity of non-existent / redundant / complacent diligence review systems, responsible for diligence prior to grant of receivables & subsequently to monitor stability of streams, and eager in my endeavors to comprehend the gross audacity and complacency – which empowers – aforesaid erosion of public sector net-assets valuations – and consequent blatant decay and atrophy of the value of public capital – employed in all these eroding incorporated financial institutions – via public capital !!
Or is it the existence of crony capitalism – which deliberately surpasses and overrides all the diligence review systems – incorporated in the policies of the said financial institutions ?
Deterioration in making, so even further, as a repercussion of aforesaid erosion of capital valuations, indicated via market indices, jolting even the remedial disinvestment process, to initiate the process of injecting some professionalization of said institutions, since, stocks of all major PSUs have incurred substantial decay and impairment in value of their capital – impeding the disinvestment process too !! Obstructing that route too !!
Their recapitalization, apparently for even gradual decay of that capital too, would only be possible via the route of unfolding the burden of the whole decay in value of capital – upon the taxpayer – via afresh fiscal levies – and rather coerce them financially – to rehabilitate and recapitalize the whole system – whereas the whole decay & erosion is attributable to deficient, unprofessional or deliberately flawed policy systems – and that too – sans any accountability for all the forthcoming or past decay in the value of capital of these institutions!
Owing to the massive significance of the erosion of capital issue, & some news of the bill and consequent anticipation of – some fiscal sense prevailing in the policymakers – I had dedicated a special scribble – exclusively – to the new envisaged ‘Solitary Law on Bankruptcy, Liquidation, Securitisation of Assets’.
Sole objective of this law was to override the legal sanctity of the whole gamut of dispersed fiscal, civil, criminal law’s provisions – attributing to aforesaid issues – and culminating all of those – into a single body – overseeing, supervising the whole process – and the crucial objective of this law – has been to EXPEDITE THE WHOLE PROCESS – which is of crucial significance.
Well .. the aforesaid intent indeed deserves applause, however, attribute it to politics, the ‘on the way to passing’ impediments are destined its way – prior to its culmination into a full fledged result oriented driven body / system !!
Another recent welcome fiscal move has been – allowing foreign incorporated bodies to acquire securitised assets – via special purpose vehicles !! This move would certainly be effective – in case – annexed with a mandatory stipulation – upon PSUs to mandatorily transfer securitised assets beyond a financial denomination – to these professionally managed securitised vehicle buyers – since, in that case, the diligence arena would be dominated by professionally driven accountable systems, not political institutions !! Govt has also proposed to exempt the accrual stream – to the Special purpose vehicle !! Certainly an incentive !!
However, in the pendency of aforesaid developments, policy systems ought be perturbed – to observe – no CAG adverse observations – under Sections 619 etc of the Companies Act – nowhere in the vigilant jolting limelight of public, no internal diligence system evaluations by CAG ?? No placement of the said evaluations in the parliament, no ‘crucial’ status earmarked to the aforesaid !!
To conclude, not solitary, rather, comprehensive cohesive initiatives – integrating all aforesaid aspects – ought be pursued & incorporated at the earliest – in the system – culminating all – fiscal, prudence, diligence system, securitised asset based bills, accountability systems – into one cohesive integrated system – possessing components of all areas !!
Enjoy your weekend ..
Adios !!
..Ankit Bhatia
