Replying to the debate on President’s address during the opening of the budget session of the parliament, prime minister, Modi squarely blamed the erstwhile UPA dispensation led by Congress for the most serious problem of NPAs [non-performing assets] of the banks – mostly public sector banks [PSBs]. What Modi was alluding to was that there had been massive proliferation of loans given by the banks on the directions of the ruling political establishment to favored industrialists and businessmen without conducting due diligence, assessing the viability of the projects/businesses and seeking mortgages. During 2008-2014, loans worth Rs 3500,000 crore were given. A big slice of these loans turned in to NPAs. Yet, these were kept under cover even as a host...
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Category: PSU reforms & dis-investment
PSU divestment – is NDA following UPA footsteps?
The sale of 51.11% shareholding of the union government in Hindustan Petroleum Corporation Limited [HPCL] – a public sector undertaking [PSU] in the downstream oil segment – to Oil and Natural Gas Corporation [ONGC] – another PSU in the upstream oil and gas segment is expected to be consummated by January 31, 2018. This is estimated to yield a whopping about Rs 37,000 crores for the exchequer. Together with Rs 55,000 crores already mobilized: Rs 34,000 crore from sale of share in 24 PSUs [vide buyback offers, initial public offerings and offer for sales]; Rs 17,000 crore from listing of insurance companies like General Insurance Corporation [GIC], National Insurance Company [NIC] and Rs 4,000 crore from sale of holdings in...
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NPAs – crack the whip on defaulters
Demonetization – were banks used to convert black into white?
Dwelling on the success of demonetization [announced on November 8, 2016], Prime Minister Modi informed the nation from the ramparts of historic Red Fort on August 15, 2017 that the government had cancelled the registration of over 200,000 shell companies [nick name for entities which are engaged in laundering black money]. He reiterated this on October 5, 2017 in his speech at the annual function of the Institute of Company Secretaries of India [ICSI] alluding to the axe falling on another about 100,000 such companies. These companies were identified while examining data on deposits made post-demonetization using advanced data analytics technique. Taking the process forward – in its all out war against black money and corruption – the government had...
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Taking on willful defaulters – Modi’s knock-out punch
The union government has promulgated an ordinance seeking to amend the Insolvency and Bankruptcy Code [IBC] – a law that was passed by the parliament last year aimed at faster and time-bound resolution of non-performing assets [NPAs] of commercial banks nearly 75% of which are with public sector banks [PSBs]. The resolution process involves the lender [read: bank] – under directions from the Reserve Bank of India [RBI] – making a reference of defaulting borrower to the National Company Law Tribunal [NCLT] which appoints interim resolution professional [IRP] for conducting the process. Under it, potential bidders make a bid for the company and the amount thus realized is used to pay back the loan. The process involves banks taking a...
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Fiscal glide path, to change or not – Jaitely’s dilemma
Having stuck to the fiscal consolidation road-map for three consecutive years beginning 2014-15 and put up a brave front in regard to remaining on course during the current year at least until recently, finance minister has now alluded to what he termed as ‘changing the glide path to meet the challenges emerging from structural reforms’. The statement was made at Morgan Stanley investor meet in Singapore. However, in the wake of Moody’s Investors Service revising India’s sovereign rating from Baa3 to Baa2 and outlook from ‘positive’ to ‘stable’, Jaitely has retracted from the above and exuded confidence that the government will stick to fiscal consolidation road-map. Yet, it is necessary to analyze the reasons for his discomfiture and assess whether...
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NPAs – crack the whip on defaulters
Union finance minister, Arun Jaitely during press conference held on October 24, 2017 announced a massive recapitalization of public sector banks [PSBs] to the tune of Rs 211,000 crores in two years viz. 2017-18 and 2018-19. Of this, Rs 135,000 crores will come from so called ‘recapitalization bonds’, Rs 58,000 crores via raising capital from the market and Rs 18,000 crores as budgetary support. Under the project ‘Indradhanush’ launched in 2015, Jaitely had provided for Rs 70,000 crore over a 4 year period viz. Rs 25,000 crores each during 2015-16/ 2016-17 and Rs 10,000 crores each during 2017-18/2018-19 . As per that road-map, the provision for third and fourth year being Rs 20,000 crores – already factored in budget calculations...
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Corporate governance – challenges and way-forward
In June 2017, the Securities and Exchange Board of India [SEBI] had set up a committee under the chairmanship of Uday Kotak, Kotak Mahindra Bank to advise it on issues relating to corporate governance in Indian companies. In its report submitted on October 5, 2017, the committee has recommended (i) more active ‘role’ and greater ‘autonomy’ for independent directors; (ii) at least half of the board of a listed entity be constituted of independent directors and increase in their number in the board to a minimum of six in every listed entity, with at least one woman independent director; (iii) promote ‘transparency’ in their functioning via listing ‘competencies’ of every independent director and disclosure of the detailed ‘reasons’ for their resignation; (iv)...
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NPAs: is the axe going to fall on the common man?
Under the erstwhile UPA dispensation, particularly during its second term, 2009-2014, public sector banks [PSBs] gave loans recklessly to corporate houses without assessing the viability of projects and conducting due diligence. Tens of thousands of crores were pumped into power, steel, telecommunications, textiles and infrastructure. In many cases, the ability of the projects or businesses to generate cash to service the loans was in doubt from day one. There was an element of ‘inevitability’ in such loans becoming non-performing assets (NPA). Indeed, these did become NPAs but were not recognised in the balance sheet as such. In 2015, the Reserve Bank of India, under its former governor Raghuram Rajan, ordered an asset quality review (AQR) of all banks to identify...
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NPAs – is the axe falling on common man?
Under the erstwhile UPA – dispensation particularly during its second consecutive tenure 2009-2014 [this is the time when ‘crony capitalism’ had reached its nadir], public sector banks [PSBs] recklessly gave loans to corporate houses/businesses without assessing the viability of the projects and conducting due diligence. Ten of thousands of crores were pumped into power, steel, telecommunications, textiles and infrastructure. The ability of the concerned projects/businesses to generate required cash to service the loans was in doubt from the day one. There was an element of ‘inevitability’ in such loans becoming non-performing assets [NPAs] [if an installment is not paid within 90 days from due date, the account is treated as NPA]. Indeed, these did become NPAs but were not recognized...
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