It’s a grey area

This is with reference to ‘Throwing good money after bad’ by Thillai Rajan and Deepa Raju (May 11). The failure of SMEs availing bank loans is a phenomenon that applies to all sectors. Our laws encourage default, and debt waiver and loan recovery policies pamper defaulters. If a borrower defaults in repayment and the account becomes a NPA, the borrower need not service the account with interest and instalments. Instead his account is settled by waiving the interest due; in many cases a portion of the principle is also waived. Unless wilful default, including negligent management, is made a criminal offence, defaulters will continue to surge.

Credit marketing is a grey area, especially in PSBs, because of the overactive vigilance machinery. PSB officers fight shy of credit marketing due to accountability. Hence it is not due to a lack of effort but deficiencies that hamper credit flow to SMEs. The creation of new entities without rectifying the infirmities will only add to the existing problems.

S Veeraraghavan

Madurai

The article was very interesting; merely providing a credit line to SMEs is not going to solve the larger issue. What banks need to do is to have a consultative approach so that it is mutually beneficial to both.

Bal Govind

Noida

Below expectations

This refers to the editorial, ‘Primary advice’ (May 11). Slow revival of the economy, poor performance of unlisted companies, and reluctance on the part of founders are the three major reasons that have paralysed the IPO segment. The sign of uptrend in the macro-economy is not up to the expectation of promoters and investors. Most companies prefer to raise funds through venture capital or private placement as these options have proved to be viable for promoters as well as investors.

More over, startups such as housing.com with no proven track record of success, have no option to acquire money than resorting to private placements and angel funds. Promoters may not like to issue shares to the public. Whatever the outlook of the primary market, the fast pace of policy reforms will likely kick off a resurgence in the primary market.

S Lakshminarayanan

Cuddalore, Tamil Nadu

It is worthwhile advice to price the offer based on underlying fundamentals. But after the abolition of price fixing by the Controller of Capital Issues, we rarely come across corporates fixing proper and reasonable price for new issues. One can understand if the investors are greedy, as this only will make the market move. But if corporates are greedy, what is the way out? Either we must go back to the earlier system of price fixing by some organisation like CCI or there should be some mandatory buy back for at least a year when there is deep erosion in the market price.

S Kalyanasundaram

Email

Your editorial elucidates the fact that there exists an imbalance between the primary market and the secondary share market. Though the secondary market attracts funds from India as well as NRIs and foreigners, it is abysmally low as only 2.3 crore investors operate through demat accounting. These investors operate only on speculation for windfall gain in a short time. The primary market suffers due to lack of awareness about the fundamentals from the perspective of new investors. As rightly advised, the new investors should thoroughly read the prospectors before investing his / her money in the primary market. Further, new investors should not blindly subscribe to offer based on tips or news reports. Promoters and investors need to co-ordinate with the regulator to resurrect the primary market.

VK Sridhar

Erode

Kudos

The articles ‘What if…’ and ‘Convertibility: a global view’ by Maulik Madhu (May 11) were very informative and covered all the aspects of current account convertibility. The information is particularly useful for those doing the civil services, banking or NET exams.

Mathew Abraham

Thiruvananthapuram

LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002.

COMMENT NOW