Letters to the editor dated September 17, 2021

This refers to the news item on formation of NARCL (National Asset Reconstruction Company Ltd), a bad bank for recovery of bad loans. It is a laudable exercise by the government to get rid of sticky loans from the books of public sector banks, equipping them to start lending activity on a fresh note.

But looking at the structure of NARCL, it is quite evident that its success revolves around several factors. As per the structure, 15 per cent cash payment will be done upfront and the remaining 85 per cent will be paid in the form of SRs (security receipts).

One should be aware that the value of SRs will be derived from the underlying assets of bad loans transferred to NARCL. The challenge lies in the method adopted by NACRL for valuing the assets transferred and its realisable value as this will determine the marketability of SRs which is tradable in the secondary market. Another issue revolves around the generation of 15 per cent cash payable to banks upfront.

Also, the guarantee period of five years on the amount of ₹30,600 offered by the government proves to be too short a period to make any significant recovery on the part of NARCL when compared to the period of NPAs, languishing with banks for several years.

Chennai

With reference to ‘Cut reliance on petro tax revenues’ (September 17), the transition from fossil fuel to EV would help the nation in reducing carbon emission, but fiscally the economy would get hit by the gradual decline of tax revenues generated from the sale of petrol and diesel.

The Centre and the States must chalk out alternative plans to compensate for the revenue loss due to the decline in sale of petrol and diesel.

While it will be difficult now to gauge the speed at which the consumers will switch to EV, plans need to be in place to ensure that the exchequer does not suffer.

Chennai

This refers to the report on the Sensex topping 59,000 (September 17). Sane voices like that of the SEBI chief about overstretched valuations don’t seem to be having any effect on the frenzy for stocks which has resulted in the market touching historic highs.

The market has risen too high too soon for comfort and even a single hint of any bad news is likely to see it tumble. Smart operators will make their moolah, while the ignorant, having burnt their fingers, will vow never to touch stocks again. Stock markets do not work on logic but on perception. And the perception is that stock market is the best place to make easy money in the shortest time. Unfortunately, it also becomes the best place to lose one’s hard-earned money.

Mumbai

In a recent CII summit, SEBI Chairman’s cautionary advice on the liquidity front in the booming stock market is timely and well-informed. That the present market dynamics of stock prices is not supported by companies with strong fundamentals and realistic asset valuations is a serious concern and the market may not sustain in the long run.

The way every IPO is getting oversubscribed multiple times in the primary market depicts the penchant of investors to make instant listing gains, which is not a healthy sign.

Bengaluru

It refers to ‘Hitting the road with a sensible incentive scheme for auto sector’ (September 17). It is indeed an innovative proposal covering almost the entire spectrum of automobiles.

The announcements, which will benefit both automobile companies keen on clean technology and their ancillaries, are a push from the demand side. But when it comes to supply side like electric generation, transmission and creating sustainable charging infrastructure, it would be great if the government comes out with PLI schemes to cater that as well to cover the entire value chain.

Noida

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