In a Moody's to celebrate..?

Which political party  would give up the opportunity to capitalize on any scrap of positive "data" More so during election time? Mercifully, the pink dailies were more sober in their reaction to Indias sovereign debt rating by Moodys  ..

The moot question is how does it impact us , the common folk ? Would prices fall, would income disparity reduce, would jobs increase? The manner in which political parties claimed credit on all these fronts on the back of the rating is unfortunate. The simple fact is that sovereign ratings are just pointers to lenders to "assist" in their decision to extend loans  to Corporates. Country to country grants ( which are few and far between) and World Bank/IMF bailouts do not need these ratings.

Let us not forget that the lender too is in the marketplace and has to compete. Any lender , if convinced of the merits of the case, would use the rating only as a bargaining chip when it comes to fixing interest rates and tenures. He keeps looking over his shoulder at the other lender in the queue. No Indian Corporate with a good proposition has failed to tap the international markets . On the other hand an excellently managed Corporate like HDFC Bank is rated below Citibank, solely on account of its location.

Our economy needs far more scrutiny on its performance then a Corporate centric  rating from a "for profit' body. It needs other metrics , like the progress on alleviating unemployment, reducing prices of common consumables, improving access to health care, and  education to name a few. It's not time yet for our mood to turn positive on any of these fronts. Our much publicized growth rates, despite the so called 'trickle down" effect , is only widening the gap between the rich and the underpriveleged.   
   
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25NOV17

7 is the new 13!

Amongst the various policy guidelines from the RBI and the modifications to various Acts by Government in recent years , the Insolvency and Bankruptcy Code (IBC: made into law in 2016), is creating ripples in Corporate India. The preamble stresses on the objective of speedy resolution of disputes on bad loans keeping in mind the interests of both the Borrower and the Lender, minimizing loss of asset value which otherwise occurs due to prolonged litigation.

The Code has laid out a procedure to resolve all disputes on bad loans between Borrower and Lender  ( or Debtor and Creditor) within a 180 day time frame.

Clause 7 in the Code provides for any Financial creditor ( as contrasted to an Operational creditor-one who is due for goods delivered or services rendered) to file an application before the National Company Law Tribunal(NCLT) with all facts. If the documentation is in order and the Authority is convinced , he/she just needs to "admit" the application and the process commences... within 14 days of the application . The first blow to the debtor is, that without the opportunity of being heard   an advertisement in a prominent newspaper of the Insolvency process is released again within 14 days. Pretty hard!

The harder bit  is, even if a settlement is reached with the applicant creditor, the process MUST still go on and the debtor has to settle with all creditors, irrespective of whether they raised the matter in the first instance!

Fortunately in the latter case, the Supreme Court have stayed proceedings in two cases. Hopefully that should set a precedent. But the damage to the debtors reputation is done.    

And as far as the first one of admitting the application without a hearing from the debtor, the Authority themselves seem to have realized the unfairness of it, and in recent applications an opportunity has been given to the debtor.

Else 7 is the new unlucky number !