Thinkpad: Continue with



Good Sunday.

India Reforms Better in Times of Crisis“;”Don’t let a crisis spoil“- we heard a lot about this when the Covid pandemic hit. It may have taken a good eighteen months for this message to hit home. Although” reforms “is a generous (and inaccurate) description of what is happening, we are certainly seeing some long outstanding decisions being made.

A “get by with it” mood, if you will. Some of these decisions will do good, others will look good, but won’t do much.

Given Thinkpad’s bias to the financial sector, we’ll start with the government’s decision to provide partial collateral to a bad bank put in place by, well, the banks.

Discussions around a bad bank began shortly after the Asset Quality Review in 2015. At that time, leaders believed the government should stay out of the mess and let a private sector solution emerge. But we all know what they say about the best-designed plans …

Six years later, banks still hold the majority of bad loans from the last credit cycle, although much of the hard work of provisioning is done. Yet somehow the government views the bad bank as a magic wand and therefore it will soon be up and running.

About Rs 2 lakh crore in loans will be sold to this National Asset Reconstruction Company. The government will guarantee about Rs 30,000 crore of collection over a period of five years against security receipts issued.

Analysts have raised some concerns here. Macquarie’s Suresh Ganapathy asked the philosophical question: Banks own this bad bank, banks will provide the capital, then the banks will sell their bad loans to this entity and make a profit? Ganapathy considers this blatant.

There are also questions about how the accounting will work and if this set of assets can really lead to significant recoveries. You can get an overview of these views here.

Generally speaking, the failing bank belongs to the “seems-good-but-does-little-well” category.

An essential decision to come to the aid of the telecoms sector was also taken this week.

Unlike the bad bank, this series of announcements came just in time. Yet questions arise as to whether the country will be able to avoid a duopoly in the telecommunications sector and whether we will be back to square one in four years when the offered moratorium on government payments is exhausted. You can listen to the expert speak here.

The sale of Air India also took a step forward, with the receipt of two financial offers. Just before that, a small but important change had been made, allowing losses to be carried forward by RSUs even after a change of ownership. It could help Air India’s divestment process.

Someone somewhere in the government will say a prayer when it is over.

For monetary policy watchers, we would like to highlight a notable speech by Deputy Reserve Bank Governor Michael Patra. Amidst many tensions in the bond markets, Patra said the RBI intended to return to just 4% inflation by 2023-24 to minimize the sacrifice of growth. He defended the RBI’s use of the reverse repo rate outside the jurisdiction of the MPC and attempted to draw a line in the sand between liquidity policy and normalization.

“We don’t like temper tantrums; we like warm, seamless transitions – descent paths rather than forced landings,” Patra said.

Is the position of the deputy governor in charge of monetary policy justified or are we witnessing the beginning of an error? BloombergQuint will explore this further next week. But it’s something to think about.

We’ll leave you with art instead of music this week.

Want to own a track from your favorite Amitabh Bachchan song or dialogue? It is now possible with an NFT! Bachchan may be the first, but artists young and old believe they can better monetize their talent using NFTs, Shivam Vahia reports.

So maybe the next time Bachchan asks: “Simple paas ghar hai, bangla hai, gaadi hai … Tumhare paas kya hai? “, You can say: “Simple paas iss dialogue ka NFT hai”.

See you next week.


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