Sunday, August 1, 2021
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Ding dong battle between banks and government

Credibility of rating agencies all over the world is under a cloud, no accountability. Subprime crisis and failure of Lehman brothers are evergreen in our memories.

The Bankers are neither god nor astrologers to predict what will happen in business? Similarly rating agencies are also handicapped for various reasons. Business cycle is also taken into when banks lend and also do a swot analysis. Can anyone on earth could predict crude prices will crash from USD 120 to USD 40. Similar is the case with steel, iron ore, coal, other minerals, commodities.

These in turn impact other industries like shipping mining power generation etc. Bhushan Steel was one of the best managed steel industry. Steel prices crashed they had to shut shop and sell the unit at throwaway price to Tata’s under IBC because they were not in multiple sectors like Tata’s, Birla’s, Adani, Ambani who also were impacted but could survive as a group because they earned in some sectors where the impact is not much. In addition to business cycle the SC judgment in coal scam 2G scam has created several lakhs of NPA in Banks and bankers are blamed.

Recently Harish Salve has agreed with the above analysis. Telecom sector who killed? It is government policies the final nail on their coffin is the SC judgement on AGR. Who killed real estate industry? It is again the demonetisation and govt policy. Third is the atmosphere of accountability at every level with bankers bearing the brunt. Overnight the promoters and bankers are declared as criminals and CBI cases are filed against them. You have all worked in the bank and passed cheques in overdraft accounts of corporates. Have you any time while passing the cheque verify the genuinity of the transaction (related to business of the corporate or ensure end utilisation by verifying the payee details) and whether you have time to verify when it is received in clearing.

Now cheques issued by corporates on their sister concern or associates are treated as diversion of funds and the account is declared as fraud and cases handed over CBI who immediately will see that bankers are arrested and sent behind bars. No businessman is willing to invest his money to start a new industry or increase capacity of existing industry or borrow from bank. This is one of the main reasons for slowdown because even bankers are not ready to lend though people write all theories and bashing bankers.

We have never seen a new loan proposal for setting up industry or expansion of Rs 10 Cr and above. Nobody wants to take a risk in this atmosphere. Let us stop this armchair bashing of bankers based on old stories because banking has changed with lot of checks and balances including sanctions being delegated to Committees at various levels and it is not so easy to make every person on the chain of committees to succumb to a phone call from FM or MD of the bank.

The rating agencies, Auditing firms of CA lobby and above all PSB Boards are equal ingredients to make chemistry. Hence, Finance Minister warns Banks against trusting rates blindly and stress the need for improving branch level connection with clients to break the present stalemate.

(The views expressed by the author in the article are his/her own.)

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