Assocham’s suggestion to privatise PSBs as a solution to prevent large-ticket frauds diverts the issue ‘Assocham call to privatise public sector banks irks unions’ (February 20). 85 per cent of NPAs in all banks, not only PSBs, is from the corporate sector, who are members of Assocham. PSBs supported the push to infrastructure. It was corporates that leveraged the situation to have access to cheap funds and divert them elsewhere.

As a responsible representative of corporates, Assocham should have advised its members not to venture into risky propositions. It is not too late to get the defaulters to pay their dues to PSBs. This is public money.

S Veeraraghavan

Madurai

AIBEA has rightly condemned the suggestion to privatise PSBs. It is the private sector entities that owe a lot to banks. Many recent financial irregularities such as those involving Kingfisher Airlines, Nirav Modi, Rotomac, Bhushan Steels, etc, have stemmed from the private sector entities.

It is the job of Assocham and the chambers of commerce to insist that their members keep their houses in order as far as bank borrowings are concerned. They should instruct them not to default. Being in the private sector doesn’t mean they are efficient.

RS Raghavan

Bengaluru

Yet another fraud

In light of the Rotomac fraud, we see that loan defaults by large corporates have increased the work of enforcement, investigating and IT agencies. They come to light only after reaching tipping point. The loans to Rotomac might have been priced based on assumptions like risk rating exercises, directed interest rates and the MCLR formulae. Most of these loans are priced at an average of 9-10 per cent. Even assuming that the facilities are fully used, the interest works out to ₹30 crore a month, whereas the unsecured loans given to individuals are priced at 15-18 per cent.

Another flaw is the absence of granular audit of transactions. The financial institutions are, without their knowledge, financing shell companies without any credit assessment. What is the guarantee that such funds are not diverted and is there any process in the to identify such transactions and charge a higher rate?Since most of these transactions are done on a virtual platform or through a centralised process, is there any AI process built into the system to identify them and charge a higher interest?

Nagaraj SR

Bengaluru

Viable for all?

IBC norms should not allow dubious promoters to sell holdings and re-bid during the IRP. Also, it would be unfair to de-list a stock and reduce the book value to zero to prevent further trading in secondary markets. It closes the only exit door for retail shareholders, especially if the firm runs a risk of being insolvent in due course.

Furthermore, borrowers with loan delinquencies should be given an opportunity to refinance the credit and fulfil their obligations to improve the NPA situation for lenders and retain market confidence.

Regulators, besides mandating real-time market disclosures and rigid compliance reporting for banks/FIs, must enforce stringent audits and robust surveillance during the IRP to ensure that businesses carry forward the actual and realised losses only.

Lenders and/or merchant banks must value the assets at fair market-price to determine accurate tax liabilities. The entity formed after the business acquisition/spin-off should function seamlessly, with no impact on stakeholders.

Girish Lalwani

Delhi

Great ruling

Kudos to the Supreme Court for a direction that all candidates contesting elections must disclose their “sources” of income, including those of their spouses and dependent children. The assets declared by politicians must be thoroughly checked by the I-T department. For this purpose, all politicians must be required to file their returns even for incomes below taxable limits; the returns of their spouses and children must also be compulsorily scrutinised.

M Kumar

New Delhi

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