Letters. Do the right thing

This is with reference to ‘Private enterprise, no panacea for scam’ by Arun Maira (March 12). A business design will not be viable unless its efficiency parameters are in place along with inbuilt ethical factors. The basic dictum of profitability is included in the organisation of business processes, as well as demand. There is no converse correlation between efficiency and engagement of moral prerequisites. Only the absence of the latter paves the way for scams and fraud. These are two sides of the same coin.

The infusion of value-neutral technological advancement must be layered with safeguards for their acceptability and promotion of business models without ethical strictures must be curbed legally. AI apps are often found to exceed their brief, and this is worrying.

The solution lies in appropriate adoption of dynamic systems, thoughtful induction of AI aids with human interface for rectification of wayward transgressions, continuous and cautious measures to nip plots in the bud, qualitative enhancement of internal audits, inculcation of institutional and organisational ethics and sensible incorporation of safety vigilance.

Bengaluru

One of the key issues facing private entities in building public infrastructure through government-owned enterprises are the vagaries in realisation of their receivables on time. For instance, public utility payments terms state that ‘payments will be made within a reasonable time’. If a company deviates from this clause their bid is not opened. Some of the regular payments during the currency of the contract take more than four months. And the final bill amount which can vary between 15 to 20 per cent of the contract value is settled a year or so from the date of completion. In addition the private company has to furnish a bank guarantee which has to remain valid throughout this period, which means blocking of margin money.

The simple argument would be that for success you have to price in these costs. This doesn’t work due to the highly competitive bidding process and limited opportunities. So even performing infrastructure companies can fail if the norms of the regulator are disconnected from ground realities.

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This refers to ‘What's the role of public sector banks? by Subir Roy (March 12). What a sad state of affairs. PSBs don’t exist only to fund long-term infrastructure projects. They do this because private lenders are reluctant to fund them. Besides, it’s PSBs that cover every corner of the country. Since it is not viable, private sector banks prefer avoiding rural areas. And let’s not forget government interference in decision-making processes. The Government needs to create a stronger bond market so that the unnecessary burden on PSBs can be offloaded.

Noida, Uttar Pradesh

Subir Roy hits the nail on its head when he says funding infrastructure projects landed PSBs with insurmountable NPAs. Firstly, closing down development financial institutions which primarily paved the way for commercial banks jumping into long-term and project loans, was an unwise decision. Secondly, the hurried restructure of big ticket loans without an objective cash-flow viability study without an independent examination of the original appraisal and restructure was the wrong move. These two aspects combined with administrative issues related to the control mechanism through stakeholding diverted the attention of commercial banks to unrelated and untested areas of business.

Even after seven decades of independence and five decades after the advent of a public sector banking culture, banks are not clear about their role in the industry. They are caught between commercial viability and social acceptability. It is high time the conflict of interest thrown up by ownership status and regulatory status through the RBI is sorted out. why not establish an Indian Banking Regulatory Authority?

Bengaluru

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