Asset quality of banks has been totally damaged by bank
officials during last one or two decade by indulging in corrupt practices.
Similarly government of India under the leadership of Manmohan Singh and Pranab
Mukherjee has damaged the financial health of Indian economy and undoubtedly
there exists a policy paralysis due to dirty politics of UPA government and due
to large scale corruption prevalent in all offices.
Government has failed to
contain Fiscal deficit, price rise, inflation, trade deficit and other key
indicators in the range of sustainable extent. Ratio of Non-performing assets
is on rise in almost all publics sector banks despite the fact these clever banks
have been applying all their brain to conceal bad assets through restructuring
and rephrasing the repayment schedule of loan and credit facilities.
Corrupt
bank officials are corrupt from top to bottom and they never allow good
officers to hold key positions and similarly Ministers of all departments allow
only bad officials to hold key positions.
Flattery and bribery is the key for
any officer in any office to ensure his or her career path and to ensure a
peaceful family life.
Not to speak of clerks and junior level
officials ,even senior IAS and IPS officials are not transferred strictly as
per exigencies of work and promoted not strictly as per merit but mostly as per whims
and fancies of ministers and departmental heads. Similarly top ranked officials in banks have to toe
the line of culture prevalent in Ministries for their survival.
It is a system in India
to give value to rating agency before taking decision on any project of high
value. Similarly sovereign rating is assessed by various international rating
agencies. Banks in India have to seek external credit rating of all borrowers
having exposure of Rs. 5.00 crores and above. In such position every borrower
who has to avail or who has already availed credit facility of Rs.5.00 crores
and above from financial Institutes has to get his financial health rated by
external rating agencies like CARE, ICRA or CRISIL or other approved rating
agencies for the purpose. Undoubtedly they need to spend a good amount for getting good rating .
Unfortunately Rating is not improved by improving the
system and by changing the policies and practices but by prevailing upon the
officials who are assigned the work of rating.
Therefore even if a
company is not in a good financial health, the officials of the company as
usual and as a set practice pays huge fees , unaccounted comfort fee and offer
costly gifts to manage good rating from rating agencies. The more
unaccounted bribe they pay to persons associated with rating agencies the
better rating they get in return and in the same way they motivate bankers to
sanction credit facility as per their need or as per their demand , justified or
unjustified. For this purpose they (all corporate houses and all
businessmen)are ready to spend lacs and crores of rupees on bank
officials too in proportion of their credit need to ensure sanction of credit
facilities in time and without raising much queries .
When bank officials and
corporate can manage good rating from rating agencies, auditors and other
regulating agencies, government can also manage the same from rating agencies
by paying some comfort money, by extending red carpet welcome, by helping kith
and kin of persons associated with rating agencies or by extending helps to
people of rating agencies in other sphere of life.
This is India where
anyone can manage any powerful official by paying bribe and by extending red
carpet welcome. Lawyers, Chartered Accountants, Valuers, Tax officials and all
other officials who has power to sanction benefits to their customers or who
may provide comfort to their clients , can be managed by payment of bribe in
cash or in kind.
Indians have to pay bribe money or say comfort fee to all in
government departments, banks and insurance companies right from peon to
highest post in the department. It is therefore possible that ministers and key
officials who were entrusted the duties of handling officials of rating
agencies have failed to persuade and motivate rating people to give good
rating.
When rating of banks in
USA was downgraded and when rating of USA was downgraded by S & P last
year, Obama led government made all efforts to improve the financial health of
the government and that of financial Institutes.
In India politicians blame
officials of rating agencies for bad rating and they do not like to admit their
failure in providing good governance and their failure in gauging the health in
right time and in taking all reformatory steps including Jan Lokpal to improve
the financial health of the government and that of the banks.
It is worthwhile to
mention here that the present central government did not fail to teach a lesson
to followers of Team Anna and Ramdeo who are raising voice against Corruption
and Black money because they understand very well that black money is
the key of all locks. As such the government may use coercive methods against officials of rating agencies to force them assign good rating. Banks .
When corruption has
become the system in India, it is not astonishing and unusual for the
government to use corrupt ways and means to acquire better rating from rating
agencies so that a positive thinking prevails in the fiscal market as also that
in international arena.By hook or by crook government may motivate rating agencies to write rating as per the wishes of government officials.
After all corruption or coercion is
the key behind all successes.
There is an old proverb,
“While in Rome, do like Romans”.
Last option left with the
government is to cancel the license of all rating agencies who do
not agree to allotting good rating to the working of the government or to banks.
Government may make change the rule book to making rating of a corporate or a
company or a bank as non-mandatory.
I
say so because this happens in most of financial institutes where only those
Chartered Accountants are picked up for auditing purpose who are liberal in
auditing and who help the company in manipulation of data and information and
who help in presentation of good financial results despite negative features
and sickness in the company.
Advocates
who manage judges are picked for contesting a court case. Valuers who are
liberal in valuation of landed property are preferred by corporate houses and
bankers. Similarly rating agencies who ignore adverse features and give only
attractive rating should be allowed to function and others may be barred from
rating work.
After
all government has got all powers to make or mar the future of any individual
or any institute, it may be CA, CBI or CVC or Election Commissioner or CAG.
Government
can teach a lesson to Team Anna, why not to rating agencies?
http://timesofindia.indiatimes.com/business/india-business/Govt-hits-back-at-rating-agencies/articleshow/14327814.cms
NEW DELHI: The government on Thursday hit back at rating agencies once again with financial services secretary D K Mittal saying that the change in rating outlook of financial institutions to negative was unjustified and denting investor confidence in countries such as India, which is still reporting healthy growth.
"The rating agencies have no business to say that Indian financial institutions are in a bad shape as there is no crisis-like situation. These agencies are creating a further crisis by shaking the confidence of economies doing good globally, like that of India," Mittal said on the sidelines of a conference on global financial crisis organized by industry chamber Assocham.
On Wednesday, Fitch lowered the rating outlook for 12 Indian banks and financial institutions, including State Bank of India and Punjab National Bank, to negative. The change in outlook, which may be a precursor to a downgrade that will put bonds issued by these banks into junk grade, was linked to a similar move on India's sovereign rating. Earlier, Standard & Poor's had warned that India's rating could fall to junk grade if it did not reform fast to spur economic growth. The government had, however, dismissed the assessment of the two agencies.
On Thursday, Mittal said Indian banks are sound and strong to confront any crisis that they may face due to the slowdown in the developed markets. "Public sector banks are sufficiently capitalized in India and they will be capitalized this year also. Indian government is behind all of them (banks) - public and private. They have weathered crises earlier also," he said. Besides, banks' non performing assets are not alarming either, he said.
Even as India recorded a GDP growth of 5.3% in the January to March quarter, 2012, Mittal said there is no reason for being negative about Indian economy and instead the government needs to continue to aim for higher growth.
Fitch downgrades India’s credit rating outlook to negative
Within three months of Standard & Poor’s action in April and its follow-up threat last week, global rating agency Fitch, on Monday, scaled down India’s sovereign credit outlook to ‘negative’ from ‘stable’ while citing much the same reasons as S&P — corruption and the absence of or inadequate reforms.
However, unlike in the case of S&P’s strictures when the government appeared to go on the defensive, Finance Minister Pranab Mukherjee junked the downgrade saying that the rating agencies’ observations were based on “old data” and did not reflect the recent developments.
In a statement, pointing out that the revision in rating outlook by Fitch to the lowest investment grade notch was because it had ignored the recent positive economic trends, Mr. Mukherjee said: “While the markets had already anticipated that Fitch would revise the outlook and so there is no surprise in the announcement, it must be pointed out that Fitch has primarily relied on older data, and has ignored the recent positive trends in the Indian economy”. Chief Economic Advisor Kaushik Basu, on the other hand, dubbed Fitch’s action as “herd mentality” and expressed no surprise over the outlook downgrade. “There is a herd mentality among policymakers, herd mentality among corporates. There is also little bit of herding among credit rating agencies. We were pretty much expecting Fitch to do so,” he said. He, however, admitted that even while there was some deep strength in the country, “there is lot to be done. I think that the next six months will be crucial,” he said.
Announcing the lowering of sovereign rating oulook, Fitch Ratings, in a statement, said that India was faced with an “awkward combination” of slow growth and elevated inflation as well as structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms.
Outlook for PSUs
Fitch went on to point out that the revision in outlook reflected the “heightened risks” that India’s medium-to-long-term growth potential would gradually deteriorate if further structural reforms are not hastened, including measures to enhance the effectiveness of the government and create a more positive operational environment for business and private investments. It, however, retained India’s sovereign rating at ‘BBB-’, a notch above the speculative grade.
Alongside, the rating agency also downgraded the credit outlook of seven PSUs — NTPC, SAIL, IOC, PFC, GAIL, REC and NHPC.
Countering the Finance Minister’s comment on the economic data used for the credit rating analysis, Director of Fitch’s Asia Pacific Sovereign Ratings Group Art Woo said that Fitch reviewed India most recently, typically, on a broad range of factors, such as macroeconomic policy, economy and public finances. “Negative, more precisely mean over 12-24 months there is a chance that India’s rating could be downgraded,” he told a TV channel.
The Indian government, Fitch said, had repeatedly delayed tax and subsidy reforms and thus the confluence of weaker economic growth and a large subsidy bill “means India will likely miss its 5.1 per cent of deficit target for 2012-13”. While pegging the fiscal deficit target at around 5.6-5.9 per cent of the GDP, the rating agency also lowered the GDP growth forecast to 6.5 per cent in 2012-13 from its earlier projection of 7.5 per cent.
Mr. Mukherjee, on his part, asserted that Fitch had not taken cognizance of many of the government’s recent initiatives which include fertilizer subsidy reform, capping of subsidies as a fraction of GDP (gross domestic product), the new manufacturing policy and the telecom policy.
The Finance Minister also highlighted the fact that foreign institutional investors (FII) have since reposed renewed faith in the country’s economy and have already brought in a net $12.3 billion in the first five months of 2012 as compared to $8.3 billion invested during the full calendar year of 2011.
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