Iread with great interest “PK’s Romp through India’s Financial Sector” (issue dated 18 February 2016) by Sucheta Dalal. I have been teaching accounting and financial analysis at the Indian Institute of Management (Bengaluru) and I find your article relevant for my teaching and research.
A bizarre feature of banking regulation is the regulator’s mollycoddling of banks, public sector banks and private sector banks. For example, the Reserve Bank of India (RBI) allows banks the option of recognising banks to recover fraud losses in not more than four instalments. Also, RBI allows banks to recognise arrears of wages resulting from wage settlements, in instalments.
I now understand that RBI is considering allowing banks to take the foreign currency translation reserve (FCTR), to profit & loss account. FCTR is an unrealised reserve that can be taken to profit & loss only on the disposal of a foreign operation. Incidentally, a few banks have done this already and some others are now seeking the regulator’s permission to do so. I have found that FCTR has been taken to the statement of profit & loss using the subterfuge of round-tripping of money.
The disclosure in the statement of profit & loss is also poor and the reader will not know that the profit transferred from FCTR is unrealised.
R Narayanaswamy, by email
PHENOMENAL GROWTH OF MONEYLIFE FOUNDATION!
Kudos to the founder-trustee duo Sucheta Dalal and Debashis Basu for having taken Moneylife Foundation (MLF) and its many citizen-centric activities to a new height in the past six years. Through its flagship media arm, Moneylife magazine, it has spread not only financial and social awareness amongst all strata of society, but with an E-paper and newsletter, MLF has reached out to almost a million readers.
Moneylife brought a smile to thousands of harassed people by offering them a platform to provide free advice and guidance on any problem. Moneylife magazine is not only a personal finance magazine. It has also spread its wings to the nagging problems of society whether it is a legal, housing, insurance, investment, rail safety, consumer guidance, taxation, RTI, civic issues, senior–citizen- or woman-centric help, etc. It has a panel of experts and activists in each field who hold free advisory workshops at the MLF premises.
Besides, giving unbiased information and educative articles fairly and transparently through Moneylife, MLF also holds seminars, workshops, expert lecture sessions on burning topics, from time to time. These are held not only in Mumbai but also throughout the country including college premises to train the gen-NEXT to successfully manage their own finangeneral public public at large is invited and motivated to attend in huge numbers. I think, no other media house has, so far, spread its roots to benefit all sections of the society with an altruistic view. MLF can be a catalyst for other media sensitising them to the woes of a common man engulfed with various financial, personal and social problems.
One can read about MLF’s activities and statistical achievements of the past, including the thought-provoking, frank and landmark expert seminars on each past anniversary on its website. To celebrate its sixth anniversary, on 6 February 2016, MLF had arranged an eye-opening presentation by two bureaucrats—one retired and the other one serving (RK Sinha and Dr Praveen Gedam), who presented their own illuminating model of good governance, while dealing with the subject of “Transforming India from Within”. It was a roaring success and the credit goes to the untiring dedication of MLF team led by Sucheta Dalal and Debashis Basu.
MLF, please keep up the tempo of spreading the light of awareness.
Mohan Siroya, by email
SOMETHING DID NOT SOUND RIGHT!
This is with regard to “Buying Stocks of Debt-laden Companies” by R Balakrishnan. This brings back memories of 1993, when I was an inexperienced young man. My broker was urging me to buy Hotel Leela at around Rs23.00. Back then also, something did not sound right and I stayed away. After 22 long years, it’s gone nowhere.
Abhijit Joshi, online comment
DAMPENING THE PRESENT ENTHUSIASM?
This is with regard to “Sovereign Gold Bonds: What the Pricing Shows” by Raj Pradhan. Sovereign Gold Bond Scheme is a part of government borrowing. It appears that it will be cost-effective for the government and that it will be a wise option for fresh investors, who have a craze for the yellow metal. The government and RBI will have to make the Gold Monetisation Scheme popular among institutions and religious bodies that have an unspecified huge stock of gold. Bringing the stock into the mainstream will benefit them in the long run and, at this stage, it will be a service to the nation. Their contribution will reduce the cost of gold imports. There are, however, vested interests that will try to dampen the present enthusiasm of RBI and the government.
MG Warrier, online comment
AUTONOMY IS ESSENTIAL FOR BANKS
This is with regard to “Plummeting confidence in the government's ability to tackle PSB bad loans” by Sucheta Dalal. The banking system is in a mess and is struggling to find ways and means to get out of the festering problem of non-performing loans generated continuously due to lack of professionalism and political interference in its management. The so-called autonomy has been elusive and the public sector banks survive because of Budgetary support and subsidy provided by the depositors and other stake-holders, particularly good borrowers. The economy, which is dependent on the banks for its growth, is the worst sufferer; the losses it suffers on a recurring basis are beyond calculation. However, the problem faced by banks gets glossed over and no serious attempt has been made to introduce a lasting solution to make them healthy and self-dependent for their survival. The solution to the menace of bad debts of banks lies within the banks and the borrowers themselves by introducing a self-correcting mechanism to liquidate the bad debts with the fines levied from bad borrowers and banks for their acts of undisciplined way of conducting the credit portfolio right from the sanction of loans to their liquidation. The problem of bad debts is definitely not an insurmountable one. But it requires willingness and guts on the part of the authorities to discipline the borrowers and banks without fear or favour. This autonomy is essential for the banks and the otherwise competent RBI to carry out their functions professionally.
Gopalakrishnan TV, online comment
HIGH ROCE ALONE MAY NOT WORK FOR INVESTORS
This is with regard to “Beaten Down Stocks”. One key learning for me was that to rely only on high RoCE (return on capital employed) may not work. For example, Mphasis and GMDC had respectable RoCE; however, the price did not move up for five years. I think one also needs to pay close attention to the underlying business, its future prospects and its drivers.
DYNACONS TAKEN OVER BY DR GOVIL
This is with regard to “Stock Manipulation: Dynacons Technologies”. The company has been taken over by Dr A Govil, promoter of Ducon group, USA (http://www.ducon.com/) and the market is betting on the promoter to do something good with the Indian company. The stock is way overpriced for sure; but, at least, there is some rationale for it, unlike so many non-descript stocks that have been rigged to nonsensical levels in this bull run.
ISO CERTIFICATION FOR TEMPLES?
This is with regard to “Governance and transformation from within the system can change the lives of citizens”. Shailesh Gandhi’s question is valid and timely. If a digitally-enabled method has been shown to work in a government department, why can’t it be implemented in similar departments across the country? The smart city project has earmarked crores of rupees for digital technology. So, there is ample money available for such initiatives. Information about improving governance of temples is very heartening. Maybe, Maharashtra could foster a competition among temples to get ISO certification.