This refers to ‘No worry with just ₹7000 cr exposure, says PNB chief’ (January 31), in the context of the recent meltdown in Adani group stocks. Such attempts to trivialise risks to large amounts of public money must be eschewed.
Of greater worry is the competence of PSU banks officials even in higher levels. They are selected not on the basis of their understanding of economic/commercial issues but on performance in competitive exams which test reasoning ability, quantitative aptitude, language competency, etc.
Therefore most senior level officers are not trained to understand borrower’s balance sheets, P&L accounts, and cash flow statements, leave alone conduct forensic audits and detect frauds. Bank employees must be recruited from institutions such as NIBM. More can be set up if required.
Apparently, the market has chosen to disregard the defence of the Adani group in response to the Hindenburg report as there has been a further erosion in the valuations of the group. Appeals to patriotic sentiments do not have seemed to have worked.
However Adani Enterprises has bucked the trend. It is more than likely that the group is desperately jacking the prices in a bid to save the public issue. It would be a big blow to the group if the issue remains undersubscribed.
It remains a mystery why somebody would want to apply for shares of Adani Enterprises when they are available cheaper in the secondary market.
The ongoing tussle between Adani and Hindenburg Research is threatening to take an ugly turn not only creating immense damage to all stakeholders including financial institutions but to the entire economy. Though Adani group responded with a rebuttal with a 413-page response, one had expected it to be specific countering the charges.
Since PNB, SBI have significant exposure as well as LIC, their holdings have eroded significantly and the downslide is expected to continue unless quick remedial measures are initiated by the corporate group.
It is time for SEBI to step in with a thorough probe with RBI calling for a special audit on exposure banks have to this group.
Also this issue is expected to dominate the Parliament’s Budget session when various Bills are lined up for approval. At a time when government had setup bad banks to clear NPA mess, it is expected that banks are not exposed to fresh chunk of shady loans which has the potential to shake up the entire financial and insurance industry.
Crop insurance claims
This is with reference to ‘PM crop insurance scheme, (January 31). Crop insurance claims falling 50 per cent in 2021-22 year-on-year under PMFBY is good news.
However crop insurance now is being handled by only a few companies and the time is ripe for other insurance private companies to step in as the claim amounts are falling and the new entrants need not fear about massive exodus of funds under claims.
This will certainly be another non-life insurance scheme which is important for the agricultural base and the private players can widen their client base for promoting other products too.
Katuru Durga Prasad Rao
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