Consumer Issues
Finance Ministry asks banks, insurers to move regulators on misconduct by professionals

According to CVC, professionals empanelled by banks and insurance companies like advocates, engineers or valuers, chartered accountants and surveyors are sometimes involved in unfair practices including false or distorted reports which lead to distressed assets of the banks or unfair claims settled in insurance companies


New Delhi: The Finance Ministry has asked state-owned banks and insurance companies to take up the issue of misconduct by professionals like advocates and chartered accountants with their regulating bodies like Institute of Chartered Accountants of India (ICAI) or Bar Council of India (BCI), reports PTI.

 

The ministry has issued the directive to heads of public sector banks, financial institutes and insurance companies on an observation made by Central Vigilance Commission (CVC) which had said sometimes professionals present misleading reports which lead to distress assets and misleading claims.

 

"Banks and insurance companies should approach the professional bodies with complaints of professional misconduct ...for suitable action," the ministry said.

 

The professional bodies mentioned in the communication include, Bar Council of India, ICAI, Institute of Cost and Works Accountants (ICWA) and Institute of Engineers.

 

The CVC had observed that "it has come to light that the professionals empanelled by banks\insurance companies viz advocates, engineers\valuers, chartered accountants, surveyors etc., are sometimes involved in unfair practices including false\distorted reports which ultimately lead to distressed assets of the banks or unfair claims settled in insurance companies".

 

While fixing up accountability, the maximum that the banks can do is to de-panel such professionals to future assignments.

 

"Since, decisions taken based on such reports result in huge losses to the organisations, mere de-panelment does not serve as deterrence to such unscrupulous professions," the Commission had observed.

 

The Ministry has asked the public sector banks (PSBs), financial institutions (FIs) and insurance companies to insert an "enabling clause" in the tenure of appointment or engagement of professionals.

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Can Chidambaram play ‘King Canute’ of divestment?

Finance Minister P Chidambaram has made it a point that divestment target of Rs30,000 crore be met despite lack of reforms, poor performance of PSU shares and deep market apathy on the part of retail investors

 
Recent media articles have pointed out that the re-appointed Finance Minister, P Chidambaram, has insisted that the divestment target of Rs30,000 crore must be achieved, “regardless of the market conditions.” He has directed his officers to work accordingly. This is wishful thinking. Against the finance minister’s ambitious target of Rs30,000 crore, nothing has been raised so far (only Rs124.97 crore had been raised from NBCC IPO), five months after the budget. 
 
Most importantly, unless shares of public sector units (PSUs) are offered at really attractive rates, which the previous disinvestment secretaries have not understood, investors will not bite. After all, investors that have put their faith in government shares have lost a bundle as initial public offerings (IPOs) of PSUs have fared miserably. We had written a piece recently, when foreign investors have begun to lose faith in PSUs (http://www.moneylife.in/article/foreign-investors-lose-faith-in-public-sector-unitsmdashagain/27765.html). In the piece, we found out only two recent IPOs have given decent returns while Coal India, one of the most promising PSUs, has hardly given any returns. Moreover, if one had a longer term timeframe and invested in the BSE-PSU index, say over the last four years, the investor would have seen his portfolio eroded by almost a third. 
 
 
This pathetic performance is because of three reasons:
 
- The government is merely divesting without reforming them or making them competitive. It must be noted that once divested, the markets will look at PSUs the same way they look at private sector. If PSUs are run unprofessionally, there is not much point in investing in PSUs let alone divesting them. 
 
- Instead of seeing that PSUs are owned by the public and they should be priced attractively, every time, the government has got greedy and tried to price PSUs as high as possible.
 
- Policy paralysis across all imports sector. The recent power blowout is an example of the acute failure of the government to take total reforms. Policy paralysis has been hurting the PSUs the most because these companies are in the core sectors of the economy.
 
A combination of inefficient functioning and high IPO pricing have decimated shareholders value. Added to this, the moribund equity markets following policy paralysis, and Chidambaram will have to pull a rabbit out his hat to meet disinvestment target. Consider the recent government bungling up of Oil and Natural Gas Company (ONGC) wherein it found no retail investors which forced insurance major LIC to scoop up over 80% of the offering. 
 
As long as the government uses PSUs to raise capital and plug all sorts of leaks and deficits, disinvestment will fail to work. Unless of course, the IPO pricing is really lucrative.
 

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COMMENTS

Dayananda Kamath k

5 years ago

they closed the disinvestment department as soon as they came to power. because it was bjp agenda. for every scam they include the bjp regime but forget to include rajiv gandhi and indiragandhi regime. they justify saying nda govt didi not change or act.when markets are booming they closed the window when markets are down they want to disinvest. or is it planned to benefit vested interst, as always with congress regime

MOHAN

5 years ago

Chidambaram must play King Ram at Rameshwaram sea :-))

sachchidanand

5 years ago

Who is going to Buy PSU shares ? Off course, Govt can armtwist LIC, GIC & PSU banks. Retailers will not burn their fingers , after reading CAG reports on scams, which are hitting headlines with regular intervals.

S R Bala

5 years ago

Perhaps Chidambaram also knows that this is not possible but the damn politics has to be played. The Govt has not been able to meet the fiscal deficit target in any of the years so far. It is indeed a lot of falsehood being tossed at the nation.

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