Securitisation etc vs Erosion of Capital – written by Ankit Bhatia

Good evening all !!

Well  ..  though, I concede, as all anticipations and conjectures would have prognosticated, all March scribbles would be demonstrating a close theme proximity with – fiscal bills, provisions, deficits, legal implications of bills, etc – being in the vicinity of February 29, I have been prompted to pursue an aberration !!

May I   🙂

Inadvertent its been, though, however, inadvertent perusal of certain obnoxious fiscal developments prompted the ingrained investment banker / blogger in me – to dedicate a scribble on NPAs, public sector banking institutions, their redundant non vigilant diligence systems, consequent exasperating erosion of value of our public capital etc crucial issues – which, though extremely crucial for the economy as a whole, however, inferring from current economic scenario, it is (perturbing) apparently residing in oblivion cache of policy-makers. Blunder-some ! Or deliberate ??

Its indeed not at all a discovery that the financial / banking sector, in any economy, is an extremely crucial barometer, as well as synonymous, of growth meter and well-being of the economy ! The synopsis of activity, balance sheets, state of affairs and consequent health of banking, financial system of any economy – indicates the rate, well-being, acceleration or impediments in the economic growth or economic activity or consequent demand or slowdown – in any jurisdiction of the world !! The whole vicious circle of credit, economic activity, return, all initiate from financial institutions.

However, despite the aforesaid significance, & especially the deployment of public capital in incorporated public sector financial institutions, it is perturbing to be a passive spectator to perturbing developments in this crucial sector, NPAs, lack of diligence evaluation systems, seemingly political interference in management, not incorporating enhanced fiscal prudence review systems / controls to ensure a prudent vigilant culture / decision systems in the sector.

Solicit perusal of the perturbing developments :

Twenty-nine state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015, much more than they had done in the preceding nine years. – Indian Express

Even as the government has been trying to shore up public sector banks through equity capital and other measures, bad loans written off by them between 2004 and 2015 amount to more than Rs 2.11 lakh crore. More than half such loans (Rs 1,14,182 crore) have been waived off between 2013 and 2015. – Indian Express 

At Rs 4 lakh crore, bad loans exceed market value of PSU banks – ET

Deterioration in making, so even further, as a repercussion of aforesaid erosion of capital valuations, indicated via market indices, jolting even the remedial disinvestment process, to initiate the process of injecting some professionalization of said institutions, since, stocks of all major PSUs have incurred substantial decay and impairment in value of their capital – impeding the disinvestment process too !! Obstructing that route too !!