An entrepreneur in India can be easily compared to our poor Panchali of our own mythology. Numbers differ a bit.
- At the formation stage there will be around 4 to 5 departments to screw you.
- All the above will keep doing the same on a monthly/ quarterly/ half yearly or annual basis till the enterprise is alive. In the event of untimely Denise of it, people associated will be screwed till their demise.
- Now the entrepreneur, while running the enterprise, will add screw drivers such as clients, customers, Creditors, lenders (private or/and bankers), borrowers, liasoners & agents (also known as conduits). This category is supposed to screw you jointly and or severally for your omissions and commissions. Then they are supposed to screw you for their omissions and commissions- by virtue of their positions – to insulate themselves from damages that are bound to cause due to their omissions.
- So, effectively, the entrepreneur gets enjoyment 24×7 with or without really asking for.
The most needed of all the screwdrivers is the star screwdriver or commonly known as Banks. They lend you provided (1) your project is viable (2) project is just ok but promoters are dynamic and can make it happily viable from just ok position (3) project is not viable at all and it’s death date is known beforehand, lending is substantial (means at least few hundred crores IF NOT few thousands) and above all relations with powers that be is well established.
Majority of category 3 will turn out bad over prefixed period. Categories 1&2 will be screwed further deeper to subsidise the bad ‘3’ as it is after-all related na?.
Category during their days will enjoy the most. Least of interests, least of margins, VIP treatment and above all supplement lending for various “sister”(?) concerns comes without even asking. Rather institutions will give you idea as well as money.
I am of the firm belief, that majority of the medium and higher than medium enterprises (in today’s context; means 2000 to upwards of tens of thousands of crores exposure) are turned NPA by design, one would draw. Because in many cases one would wonder how could even the lenders find those projects Viable. What happens is if you are such and such of a so and so, not much is asked- it is just accommodated, sanctioned and disbursed, consciously knowing the acct will turn sour earlier than expected. Secondly if you have powerful CA, your file will fly through the tables and successfully disbursed with unbelievable speed. Technically there could be hundreds of reasons for lending audaciously large sums to these biggies with single digit interest rate, marginal or negligible margins as collaterals/securities and above all peaceful sleep in spite of defaults, but those companies – small or medium or big – dependent on these above companies are paying almost 20 to 30% more financial cost. Where is the rationale or what is the rationale? I don’t know whether it is in the purview of any banker to do anything about it; Lender do give his business reasons for the inequality I pointed out; but that can not be the way it should work in a country like India. They should also understand that what was small yesteryears are only tiny today…the ones you called medium is small and large of those days is medium today and so has the needs changed. I would also like to know in what definition are these companies whose exposures are in excess of tens of thousands of crores or even lac crore. Large? Mega? And with that yardstick what should be small, tiny or medium???
Funny enough, the losses for the lenders also are contributed majorly by the same biggies and definitely not by the slimmer and smaller borrowers.
Opposite of the above is –
You have a situation, where the entrepreneur needs a hand to hold his finger at an appropriate time to get out of a turbulent situation (situation can be of own creation out of stupidity/ignorance/misguided or due to unforeseen market fluctuations/ realisation problems etc) and the lenders will by default or by design – I can’t be a judge here – will refuse to do so by assigning many reasons, thereby killing an otherwise redeemable enterprise. I can produce a few hundred of this category within one or two cities of one state. Guess the numbers countrywide. I am still at a loss to understand the psyche of these lenders.
One can see the exposure of the business houses who kills smaller ones are all above tens of thousands crores. What will you call them? XXXL corporate?? Let’s get to the reality and for that only govt can make them see reality. The lenders on their own can never see the reasoning. They will still go by the bibles of last century ratios, percentages etc., which is (1) no more relevant in the current scenario for many industries and (2) does not apply to the so called XXXL corporates… it has to change and the earlier it is done the better for the country and lenders in general and the honest borrowers in particular.
Madhu K Nair [September 2016]