Monday, September 10, 2012

“We are moving to electronic platform funding”

Manas Kumar Nag, CGM-Small and Medium Enterprises, State Bank of India

State Bank of India (SBI), being the largest lender in India, has the benefit of a wide and deep presence in the Indian market. This also reflects in its performance with respect to extending credit towards MSMEs over the years. SBI has in fact emerged as one of the biggest contributors to meeting their financial needs in a profitable way. Manas Kumar Nag, CGM-SME, SBI talks to Bhuvnesh Talwar and shares the dynamics of the company’s SME business in further detail:

B&E: What is the eligibility criteria that you have defined for SMEs to avail loans with SBI?
Manas Nag (MN): MSMEs comprise of manufacturing, trade and services organizations. We have various customised schemes/products for different groups of borrowers. Therefore, eligibility would be as per the scheme. However, broadly speaking, we apply the Know Your Customer (KYC) concept, which includes identifying whether the borrower falls within the definition of micro, small or medium category and assessing the business activity and the borrower credentials to see whether the business can generate sufficient income. We have presently an internal system of rating, which is a prerequisite for sanctioning loans above Rs.25 lakhs. We have certain hurdle rates below which we do not sanction loans.

B&E: What are the major loan/credit products/schemes that you have launched for SMEs, in consideration of their diverse needs?
MN: We have several customised schemes and products and also have tie-ups with industry majors for funding vehicles or construction equipment or healthcare products. In addition, we also have schemes like Doctor Plus/School Plus, which are specifically tailor-made for such groups of borrowers.

B&E: The default rates for these products are generally a cause for concern. What has been your experience?
MN: Default rates are very low in certain schemes and in others, they are higher. For example, we have found that our doctor plus scheme has a much lower default rate as compared to our transport plus scheme. The nature of activity, choice of borrowers and the area of operation are the factors that determine the rate of default.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Saturday, September 08, 2012

US: CHIEF OF STAFF

Agreed that he took charge at a time when the economy was struggling and that he was faced with an ambitious agenda (that of pushing through key reforms as promised by Obama in his Presidential campaigns which emphasised on Hope and Change). The hard-charging, high octane, arm twister Rahm, an enforcer who had a reputation of getting things done, was entrusted with the job of the White House’s Chief of Staff for steamrolling the change Obama planned. And Rahm – or Rahmbo, as he started getting nomenclatured came to be better known as being a foul-mouthed showman and backroom infighter, who managed, mauled and massacred dissent by standing on tables and screaming; of late even being viewed by many party activists as an instigator of a feud that was dividing the party.

Things went awry in August 2009, when Rahm, in one of his weekly strategy session featuring Liberal groups and other aides (who were planning to air ads attacking conservative Democrats who were balking at Obama’s healthcare overhaul), was back to what he was best known for. He responded to the criticisms by calling the liberal activists as “F***ing retarded.” Although that particular instance was not the sole reason, that presumably was the tipping point, where members got push converted to shove and demanded a port of departure call on Rahm’s war-carrier. David Weigel, Political commentator at Slate, based in Chicago, had this to say to B&E, “After nearly two years of Rahm Emanuel, liberals are pretty much confident that he was a paper tiger, a drudge who never missed an opportunity to undermine the progressive agenda and a man whose alleged formidability never rendered to big, substantive triumphs over Republicans.”

My favourite vaudeville performer Will Rogers once said, “There are two theories to arguin’ with a woman. Neither one works.” You could say that while arguing with Rahm too, where thanks purely to Rahm’s whimsical and fanciful style of debating and arguing, the President had a roller-coaster ride in the White House in the last 20 months. Be it Rahm’s crossing swords with Nancy Pelosi (speaker of the House of Representatives), or his failure to press home the President’s political message in the way Obama wished, or his handling of the economy and Wall Street regulation, Rahm’s pugilistic approach was solely blamed by commentators for delivering defeat. The President needed a Chief of Staff who had the wisdom to help him chart out a bold and progressive path. Someone who could successfully play the role of the President’s gatekeeper, like what James Baker did for Ronald Reagan. Rahm (who also doubled up as the President’s top political adviser and legislative strategist) at least did the gatekeeper part pretty well. But given that the mid-term elections in November would be a bloodbath for Democrats (in all probability, the elections could transfer the control of the House and even the Senate from Democrats to the Republicans), Rahm’s exit was strategically planned to minimise losses. Simply put, this is the return of favour that has been meted out to Rahm for the mistake he committed of pushing Obama too far to the middle.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Tuesday, September 04, 2012

Lehman is history...and future too

On the 2nd anniversary of the Lehman Brothers debacle, what is evident is the fact that economies have learnt very little from history. B&E does a quick recap of the occurrence, the domino effect and the current global economic situation By Asif Ahmed

September 15, 2008. Henry Paulson, the then Secretary of Treasury, United States, had just been informed of the impending Lehman collapse, when he excused himself from his colleagues to make a most important call. That call went not to the President, but to his wife, Wendy Judge, to whom Paulson said in a completely mellowed down voice, in contrast to his imposing 6 ft 4 inches physique, “I am afraid.” Paulson later termed the day as the most ‘horrific’ and ‘saddest’ day of his life.

In the absence of an acquirer and US federal guarantee, Paulson announced that US Treasury couldn’t locate a suitable borrower for Lehman Brothers, thereby purging billions in dollars and putting thousands of employees at risk. What he didn’t know then was how many billions were going to be affected by this collapse.

A month later in October 2008, in response to the subprime mortgage crisis, The Emergency Economic Stabilisation Act of 2008 was passed which authorised United States Secretary of the Treasury to spend up to $700 billion to purchase distressed assets, especially mortgage-backed securities, and make capital injections into banks. A year-and-a-half later, the Euro zone too had to adopt a similar bailout, called the European Stabilisation Mechanism, triggered by sovereign crises.

So, a few went under Chapter 11 bankruptcy reorganisation, a few more under Chapter 7 liquidation, and the topography of US financial system changed forever. On the second death anniversary of Lehman Brothers – and hundreds of other banks, which died in the hope of receiving a few million dollars of that $700 billion – the question that needs to be asked: Is the financial world a better place to live in, now? How much ground have we covered in terms of financial regulation so as to avoid future shocks?

2008 BC and 2008 AD
If one were to define the timeline of the financial world, the best way to line it up would be 2008 Before Crisis and 2008 After Destruction. The advanced economies were the first one to react and plug the loopholes that left big holes in the pockets and balance sheet of banks and central banks. Paul Volcker, former Chairman, Federal Reserve, who was hired to figure out a solution for the 21st century problem, had a simple military plan – he asked banks to curtail proprietary trading, private equity and other ‘risky’ investments that banks make with their own capital. On a more global platform, multi-lateral financial institution like the International Monetary Fund (IMF), Financial Stability Board (FSB) and Bank for International Settlements (BIS) worked in tandem to foster a more healthy financial system, the most recent of which is recommendations of Basel Committee of Banking Supervision (BSBS) and FSB to hold more capital. The BCBS has asked lenders to have common equity equal to at least 7% of assets, weighted according to their risk, including a 2.5% buffer to withstand future stress. Banks will have less than five years to comply with the minimum ratios – 4.5% common equity and 6% Tier 1 until 2019, to meet the buffer requirements. Banks are currently required to have common equity equal to 2% of total assets and 4% Tier 1 capital.


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Monday, September 03, 2012

Family democracy, Lanka style

Rajapakse is turning the Lankan constitution into a useless shred of paper

Sri Lankan President Mahinda Rajapakse brought in a landmark change in the country’s constitution on September 08, 2010 by scrapping the two term limit rule for serving presidents in the midst of both protests and cheering across the country. Consequently, Rajapakse, who is serving his second term as president, can stand for another term in the next voting to be held in 2016!

Apart from this, sweeping powers were handed over to him as a result of this amendment, by which previously autonomous institutes have been brought under his control. He will now directly appoint the main officials in judiciary, election commission, human rights commission and the central bank. Ending all controversies spurred up by the opposition, who stressed for the need of referendum to change the constitution, the Supreme Court ruled that such requirement is unnecessary. This has paved the way to end all possible legal roadblocks to Rajapakse.


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Saturday, September 01, 2012

SUSTAINABILITY IS OUR KEY TO SUCCESS

Rana Som, CMD, NMDC, talks to deepak ranjan patra about what makes NMDC the most successful mining company in the country and what are its future plans...

NMDC has been amongst India’s top 15 most profitable companies for quite sometime now. What is the recipe for your success?
Sustainability is the key word for us. NMDC started as an one–product, one–customer company but has successfully diversified into multi–product, multi–customer company. We ensure that the price of our major product namely, iron ore, is not overpriced. This pricing mechanism helps us in increasing our customer base and thus the bottom-line of the company.

You had proposed a 3-million tonne Greenfield steel plant in Chhattisgarh. How has been the progress? How valuable is it for NMDC, considering the fact that two of your critical mines, Bacheli and Bailadila are close to the proposed site?
The proposed 3 MTPA integrated steel plant in Chhattisgarh is in an advanced stage. The company has already completed the process of land acquisition. The work has been divided into various packages and the awarding of various packages would start by October this year. After that it will take around 40 months for products to start rolling out.

Do you have any other plan as part of your forward integration strategy?
We also plan to have a steel plant in Karnataka, but it will be a JV with another organisation. In addition, we are trying to put up a slime-based pellet plant (a new iron making process utilising low grade fines is in the offing with Japanese collaboration) at Donimalai in Karnataka.

NMDC was looking for foreign partners for the Karnataka plant. Any development on that front?
Regarding foreign partners for the proposed plant in Karnataka, we are in the process of negotiations and things are developing at an appreciable pace.

Any other global plans...
Yes, we are actively pursuing acquisition of properties either on a standalone basis or in JV for securitising power (Coal, both metallurgical and thermal), iron ore and manganese in regions like South America, Africa, Australia, Russia et al.


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