Corporate Houses and Banks Holding Hands and Collaborating to Rebuild India

June 4, 2013

Dr. Paritosh Basu

Emerging Economic Environment - Perceptions and Imperatives

IMF concludes 2013 Article IV Consultation with India
Public Information Notice (PIN) No. 13/14 February 6, 2013

.Growth is projected at about 5.5% for 2012/13, but should pick up to 6%* in 2013/14. Continued implementation of measures to facilitate investment and slightly stronger global growth should deliver a modest rebound in the near term.
Reported realities

~ 75% of South Asias GDP is from India

About 30% of Indian economy is coupled with world through foreign trade
Business growth - not encouraging Profit - stressed Liquidity - dynamic all around the world Growth decelerated due to a. Head winds of borrowing costs b. Slowing global growth and c. Heightened uncertainties in Policies Banking and Accounting regulations have become more stringent

Inferences one can draw 1. India can continue to grow due to drivers from within 2. If India has to grow, corporate performances have to grow and be sustained

Index Position as of End May, 13 from 52 week Low 1. BSE Sensex: Up 29.8%
2. BSE Bankex: Up 45.9%

Question Is there more scope for collaboration between Banks and Corporate Houses?

* Recent projection of OECDs is 5.3% as against 5.9% as projected in November 2012

Collaborate and Hold Hands ....

Break barriers of WE and THEY without compromising safety nets More focus on fee-based earnings to make room for lower interest

Be one-stop banker for all services, including inventory monetisation

Hold hands and collaborate to
Appreciate each others perspective in given realities of dynamic business environment Bring in dynamic changes in Terms & Conditions of borrowings to Do away with typical form filling and retrofitting Correlate with business cycle , say for commodity business Judiciously apply APLMA T&Cs to best suit in Indian ecosystem Practical application of Financial and non-financial Covenants Cross-default clause in the hierarchy of holding structure Introduce variable interest clause, leaving borrowers to hedge, if needed
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Collaborate and Hold Hands ... 2

Hold hands and collaborate for
Directional and path-breaking changes in Project Finance processes Extended L/C period and removal of Mutatis Mutandis clause Collaborated steps and joint representations to Authorities to clear obstacles Allow mid-course terms modification based on changed ground realities, e. g., Sassan Power and Tuticorin Copper plants

Be sure of whatever Norms being introduced and educate customers

Provide Currency Exchange Platform and reduce paper work Introduce dynamic credit rating norms with change in business environment Encourage Host-to-Host transaction processing for speed and safety Speed up decision-making process

Strike parity of compensation and saffs age-profile vis-a-vis international competitors

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Thoughts for Reforms from Bankers Perspective *

Credit Rating of Corporates - Include parametric scoring points for Status of Corp. Governance, Transparency and CSR activities Performance track record of Promoters and Top Leadership team Sustainability embedded management style with 4P Approach Strictly enforce punitive actions for non-compliance, e. g., KFA Detect early symptoms of defaults by effective process for monitoring Projects execution commitments Operational performance Financial health and viability as a going concern Incentivisation for more than committed performance Help borrowers by sharing knowledge of best practices Share critical and nagging Defaulters List in public, if need be Avoid building expectations - Announce only actual steps taken Introduce dynamic COD and NPA necessitated by regulatory delays Bring stability and uniformity in regulations with relatively longer term Avoid multiple-point control and advices to Banks
* RBI to take empathetic views and introduce regulatory reforms as required
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Further Thoughts

Thank You