How much is the government of India deficit and how much lower will it go according to PC?
Well it depends on how you look at the deficits, and what bank NPA number are you willing to believe.
When some deals happen you keep wondering ‘How do such deals happen?’ . In a public forum like this I am not willing to mention names, but the NPA number in some of the banks – largely of course PSU – is stunning. The methods used for ever greening is awesome – SPV, off balance sheet funding, vendor funding, equity placement, – the tricks are stunning. Especially in the infra space. You dig deeper and you realize that the problem is not confined to infra alone. It is there all over the place. There is not ENOUGH growth happening to hide all this.
You drive into Pune and you know that people are only buying houses. Luxury houses, ordinary houses…..etc. from Rs. 30 Lakhs to Rs. 300 lakhs. You land in Bengaluru drive into the city and you see houses from Rs. 16 Lakhs to Rs. 5o0 lakhs.
These have ALREADY been funded by banks. Now banks desperately need buyers who will borrow at 11% and buy these houses – so that the CASH can start coming back. If the cash does not come back who is in trouble?
Who is in trouble if Kingfisher Airlines cannot put Humpty Dumpty together again? Mallaya?
No. Not the builders. Not Mr. Mallaya.
YOU AND ME.
The banks – led by the biggest public sector bank and the largest private sector bank – have to worry about Rs. 4000 crores. Hmmm..
So you think the REGULATOR would be screaming, harsh and want all of this to be disclosed in the balance sheet, right?
If all the NPAs are provided for in all the banks, municipalities, state governments, and of course in the Central Budget, a sovereign down grade is a SURETY. Does the Regulator want this? What a question! Will the FM allow this? No. Never.
So what to do? Securitize all the loans – take a Rs. 5 crore asset and lend about Rs. 500 crores against that – and tell the world ‘Oh we have it all securitized’.
What will all this lead to? Clean bank balance sheets? Hell, no. It will lead to INFLATION.
Who will suffer? the poor will suffer the worst. Then the middle class. Then the Honest Rich. Why?
Simply because We dare not tell the truth. Satyameve Jayate. I am writing this on the eve of our Republic Day.
Jai Hind. Some times you feel Lance Armstrong was better – he atleast admitted to his crime – forced or otherwise.
We keep kicking the can, and letting inflation screw the poor.
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