Views

OMG triggered? Preaching is useful?

Living for a little less than 3 decades and a dropout from a PG course, not a B School grad.

I'll buy the 30 years of experience that there's never a liquidity crisis and it's all academic bullshit. Neither has there ever been a credit crisis. The policy makers should seriously consider inputs from popular internet forums and disregard any studies. There's no distinction between public & private investments. All the scholarly works and empirical studies are but "academic and useless". The budget should be with a singular view to boost the stock indices and prices regardless of the economic climate.

I'm all for views and debate but it seems people can't do it without getting personal.

@darth you've a potential highest credit rated client here, is manufacturing a part of priority sector lending? also given the exceptional credit rating with lenders begging for em to take money, you'd have a problem to lend below the base rate.

TLDR : not a B School grad, consider my posts as a figment of imagination

 

12/02/2016 NSE/R030-16 GESHIP +5@286.50 GMDCLTD +5@53.95 GSFC +5@59.10 HDFCBANK +1@979.90 PFC +5@146.70 PFS +5@29.95 RECLTD +5@163.10 Bill Amt:Rs.4682.07Dr

had little money in my margin account, bought something to track & add

 

Potential highest credit rated clent in here is of no relevance to me...

Manufacturing part of priority sector lending : Yes it is. To enterprises engaged in manufacturing and in which investment in plant and machinery doesnt exceed 10 crs ( this is limit for medium enterprises with smaller caps for micro and small) and subject to other conditions. So basically forced small ticket loans in banks. Also export finance ( just 5% of overall PSL requirement)

PSL has been in existence since the 70's and so nothing new. Directed lending to the economically weaker, backward, agriculture, small to medium enterprises etc. So mandate to banks to participate in the social welfare and upliftment via financing.

"Social" infrastructure was added as a category under PSL less than a year ago. And what qualifies under PSL is
- Bank loans up to a limit of ₹ 5 crore per borrower for building social infrastructure for activities namely schools, health care facilities, drinking water facilities and sanitation facilities in Tier II to Tier VI centres.

Atleast I am not aware of any other infra being classified as PSL by the RBI. Other more knowledgeable members in here are most welcome to correct me.

 

"For resources raised through long-term bonds to fund affordable housing or infrastructure projects, RBI had exempted banks for maintaining CRR, SLR and PSL (quoted from Business Standard)." I was not fully clear but I meant this. This is actually worse, if you think in terms of NPA crisis . I must clarify that there is nothing wrong in funding infra or any project (as long as its not "illegal") but if you can not get the money back then using long term bonds is quite risky. You pay interest of the bond from the date of issue but defer collecting interest on your loan by restructuring. What could be worse ? We know the fate of IDBI. A dedicated institution for industrial development IDBI never recovered from this type of financing (check the results today).
There is some good news though. One business news channel today reported that Govt. and RBI will form an ARC to "buy" the bad loans of PSBs. Then the books of all PSBs will be cleared. It is not the optimal solution but hopefully it can help de-stress the loan book of PSBs.

 

Thank You @darth

@bholu do you think it's a case of asset liability mismatch? The ARC proposal is on the lines of what the US did - TARP. But what next? The cycle repeats after a few years?

Appreciate your participation.

 

@bholu,,

Lack of the correct understanding or intent happens when the understanding is basis some news article written by some junior journalist - who probably knows very little about the Banking business and its regulatory framework. I hope you appreciate the knowledge you gaining from this this thread between @BombayBoy and me. I''m certain that for many of those in here , looking only for multibaggers and stocks which can make big bucks overnight, this exchange is pretty boring and meaningless.

@BombayBoy,

From the kind of questions you ask, it seems you are in some way associated with the banking industry in someway. so i wont get into what exemption of bonds ( liabilities and not assets) from SLR, CRR and PSL means and what was the sensible and desirable intention behind this exemption was nor get into the merits or demerits or intentions or purpose of 5/25 ( introduced only in August 2014 and did not so exist when the infra loans constituting the current NPA crisis were given out) or ALM - except saying that liquidity risk is far more ruthless and swifter in bringing down banks and Lehman proves this

 

100% Agreed. I am reading all carefully.

 

Helping Banks in any way is the worst option.Govt should just restrict itself to create level playing field or anti dumping if any thing is imported below efficient costing .Any other help that results in unefficint system which needs unending frequent support should be avoided..Let the poorly managed business go bust .Poorly managed and supported business also put stress of over capacity to well managed business.Many poorly managed Banks are also responsible for Poor health of industry,their contnious support to unefficint business is putting stress on well managed business because of over capacity .Let both poorly managed business and supporting Banks to go bust for better good health of well managed business.

 

Thank you @darth for once again taking the time to respond. I'm grateful & learn from the interaction.

I'm only asking these questions because I've a limited understanding of things from what I know or have learned. So if I'm wrong, we can have a good laugh but I can learn. I'm not associated with a bank unless you hire me Just thoughts from a wandering mind, I'm an explorer.

But I've learned something new yesterday - there's never a dearth of money and no liquidity crisis.

Also, have you read about the stories that suggest the Fed let Lehman go down so that they'd have a reason (public backing) to do what happened next and also the long-standing rivalry between Richard Fuld (Lehman) & Henry Paulson (Goldman Sachs). It's not like the Fed couldn't save Lehman, but let it be the fall guy.


“Nothing in this world can so violently distort a man’s judgment than the sight of his neighbor getting rich.” - J.P. Morgan

 

@ Darth and
BB Well I have acknowledged that the forum is very informative. Having said that I would caution everybody to make their own judgement about facts. As far as NPA crisis is concerned it was always ready to blow in face. As I said RBI gave or the banks themselves took enough leeway in the past. Now there is no option left but to recognize them as NPAs. I doubt if they are ever going to recover this money. They might recover some but full recovery is impossible. I do not know what banks, RBI, or finance ministry will do about it. The ARC looks to be better idea. Technically the govt. is promoter of PSU Banks and RBI is regulator. So they have to do something to fix it. if they have to put money, they have to put money. There is no way out.

I agree that after the clean up, sooner or later the crisis will reappear. That is why maybe a transparent and comprehensive credit bureau is required, which can rate profiles of businesses, and their promoters. If banks screen credit profile of customers they must screen profiles of businesses, promoters and set their lending practices accordingly. The willful defaulter tag was a welcome step. But the PSBs have been surprisingly reluctant to use it. Maybe they realize the promoters are too powerful or politically connected.

I think govt should slowly look to privatize some banks. In this manner the govt's liability will slowly go down in the future and hopefully working culture will improve. But is that really possible ?

 

Important also is not passing fleeting judgements without a good understanding

 

If you are responding to me I did not pass any fleeting "judgement". Its fact. Its everywhere. It is up to you. If you want to accept and acknowledge something you may. If you do not it leaves nobody any better or worse off because what has happened has happened, and nobody can undo it.

 

@BombayBoy,

Just deleted an informative message... Not worth it in here.

Your loss... But so be it

For in here i would rather only hear the voices of members who know Fact based what ails the country and what needs to be done and the manner in which it needs to be done.

 

don't give up on me @darth

If you light a lamp for others, it'll also brighten your path.

With all the upheaval and still being in denial about how could this happen to the best quality, sector leaders. I think it's the emotions at play.

 

Good point

 

My path brightens even when I light a lamp for just myself. Correct me if I am wrong.

Thankfully the super non-existing admin has provided the facility of an inbox. Message me in there if you need any light on ALM etc

Anyways having a super busy period collecting all the 'facts' all around about the wrong doings of the Guv. Plan to drag him to the Courts.... Wish me luck that the petition isn't thrown out at the lowest court itself.

Also will write to the PMO to have Vijay Mallya as his FM - for the good times he will bring to us and also induct the types of Raju and Jignesh Shah for their stellar contributions to Indian business

 

Lots of conspiracy theories around Lehman... Fingers were pointed in every direction back then.

 

Elusive global growth outlook requires urgent policy response - OECD

Reliance Jewels closed its Hughes Road store. Last August, closed Reliance Fresh at Grant Road.

 

@kharb ji there is other option of selling or merging psu banks to pvt players at auction basis like spectrum. atleast future problems will be reduced.
if the govt let the poorly managed psu banks go bust only indian govt (owning 50-75% of equity) and indian retail investors will lose their capital.
and the wilful defaulters shud b punished and made to pay back.

 

In my view first govt should give full autonomy and fair selection of top Managemt in Banks and all PSUs.After that if any bank or PSU don't survive,let it go bust and employees face consequences like private sector.Govt should form some Special selection Board and make retired stalwarts like Ratan Tata ,NaraynaMurthu and many more to select PSU top Managemt and then should give autonomy of operations.