"But I don't want to go among mad people,' said Alice.
'Oh, you can't help that,' said the cat. 'We're all mad here."
— Lewis
Carroll (English, 1832-1898)
Word for the day
Bonzer (adj)
Remarkable; wonderful.
Malice towards none
How many of those who are challenging Sasikala's claim to
Tamil Nadu CM post, on the grounds of competence and probity, did actually
speak against appointment of Rabdi Devi as CM of Bihar?
First random thought this morning
I may be alone in this; and I may be wrong in this. But somehow I am
getting this feeling that the government strongly believes that all BJP
leaders, including those who have joined the party from other parties, have
been absolutely clean in their economic, social and personal conduct.
While, we have seen cases and inquiries on grounds of economic,
social and personal impropriety on many opposition leaders, BJP leaders have
been mostly spared.
Seems PM Modi does not believe in the maxim that any cleansing
must necessarily begin from home.
"Need" is not always "demand"
The problem of
non-performing asset is not merely a financial problem. It has a distinct moral
hue.
Usually, broad based non-performing asset occur when the economic
cycle turns down, and businesses that had added capacities to cater to the
rising demand during the up cycle fail to service their debt as the capacities
remained unutilized due to lack of adequate demand.
In conventional ways, these bad debts are managed by banks through
(a) extending the repayment time; (b) easing the payment terms by lowering
interest rates and waiving the late payment penalties etc.; (c) waiving a part
of the interest and/or principal amount where the borrower's appears to be
severely damaged; and/or (d) converting the debt wholly or partly into equity.
In some cases, especially where the interest of relatively poor
people is involved, the State comes to rescue of the beleaguered borrowers by
subsidizing their borrowing, either by making complete repayment on their
behalf (e.g., farm loan waiver) or by providing interest subvention.
On lenders' part, normally, these are business decisions, taken
keeping in view the sustainability or otherwise of the borrowers' business
ability of the incumbent management to navigate through the tough times. Given
that most meaningful lenders are publically owned and accountable to their
shareholders, usually management of bad debt should not involve the question of
morality and political expediency.
However, it has not been the case in Indian context.
In my view, the investment cycle that started in early 2000s was
mostly 'hope' driven and not demand driven. To ward off the impact of economic
sanctions post 1998 nuclear tests and the bust of dotcom bubble, the government
had given up control on many sector, more notably energy (oil & gas, coal
and power) roads, and telecom.
Many private players jumped into the fray, probably without
assessing the demand scenario. Many, including the bankers and government,
mistook the "need" of infrastructure (power and road etc.) for
"demand" of infrastructure and structured their business models
accordingly. Built on weak and faulty foundation, these businesses were doomed
to fail from very inception.
Ideally, in the given condition of Indian economy, the task
building infrastructure should have been done by the government itself, as it
was in a position to borrow at 6% for 30-40yrs.
To make the matter worst, it opened the sectors like coal, power
and roads to private sector without preparing any conceptual framework. The
sustainability concerns were mostly disregarded; and so were commercial and
financial viability.
Public sectors banks were perhaps forced to fund -
disregarding the financial and commercial viability criteria. The outcome is
that about 80% of all NPAs are concentrated in PSBs, where NPA ratio has reached
12%, almost same as the capital adequacy.....to continue
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