The recent case of Bhushan steel should be an eye opener and an alert sign for the Indian economy and for the government of India. If we analyses the last 10 years of the Indian economy from 2004-2014 we will find that first 5 years terms of the UPA government was growth progressive economy where as the 2nd term win of the UPA II gave the confidence for all malpractices to grow.  Deliberate defaults have been the trends over the last 3 years. On the other hand a Bad asset sale has begun but all these numbers are very low compared to total outstanding loan amount of the Indian Banking Industry. Well I dont know the reaction after reading the whole article but few of friends would plan to kill me since these type of cases are going to become more prominent in the coming days. 

When a loan is being provided the report of the Chartered Accountant is required who gives proper valuation report about the company to the Bank. Based on this valuation report the bank enters into the contract of providing finance. Now this bribery case reveals one thing very clearly that there is network of this type of process where the Bank, Chartered Accountants & Big Cats of the corporate are involved. I am confident that in the coming days this matter will get negligible attention from the public and from media but the long term trust of overseas investors is at high risk. The reason behind that when such an huge number of NPA followed with corporate will full are not paying in such scenarios its quite clear that asset  value was inflated and the valuation report provided by the Chartered Account was gimmick report.  Now let’s get into the jungle of numbers where overseas investors risk and global investors appetite would face hard landing where bribe and other malpractices are breeding. Well we Cost Accountants have demanding to provide the Bank Audit to us but it still remains unheard. This is because we are not masters in inflated books and providing improper valuations to the bank and fool the tax payer’s money.
The growth of numbers of PSU banks outstanding loans as on 31st March 2014 stands

Now the numbers are very clear to say and depict many thing regarding the risk for the overseas investors, trust of investments in the Indian corporate as well as the authenticity of the Chartered accounts Financial Audit and financial papers prepared by them.  These are all tax payers’ money which has been deployed for growth of the Indian economy but at the end they are all going to be entered in the Banks books as Non Performing Assets. Another big question is who will be buying these bad assets.

The recent bribery case raises many questions like will Indian banks would be able to recover the money or some bribery cases would happen to turn these amounts into Bad Assets.  If tomorrow the Indian Banks fails and the government also fails to recovery the funds then what will happen to the Fixed Deposits and savings which have been kept in the banks by all of us. Will there be a situation like U.S and Europe. This rising NPA and the game of the few Chartered Accountants are very simple. The Chartered Accountants of the company and of the Bank are all members of the same Institute. Now when a corporate wants to raise loan they inflate the books and valuation of the assets. After the loan is being disbursed then the Chartered Accountants of the company and of the banks and managers of the bank in the key position get certain percentage as commission which ranges between 0.25 to 1% depending upon the case. This vicious cycle keeps on moving until cases like Bhushan steel comes up in the lime light.  Now in every case of Nonperforming assets no chartered account comes into limelight. The bribery case is one of the same strategy game .

Another question in the mind is that these loans were not created overnight. They have built over a long period of time, now Bank Audits are being conducted by the Chartered Accountants, hence why they did not raise the alarm regarding the quality of assets being financed and about the valuation of the assets being financed.

Now if we look at the quality of sectors where the NPA have grown we find:that the vicious cycle is present in every sector.

Now a another point might come up which will say that these sectors and high levels of NPA are due to slow down of the Indian economy in the last 3 years and negligible condition of export due to the slowdown of the US and Europe. Well I agree and buy this point but will you also buy these points:
1.   Pramod Mittal spent 60 million Euros on daughter's lavish wedding. Pramod Mittal, the younger brother of steel tycoon Lakshmi Mittal, owes a lot of money to Indian banks. Before his company, Ispat Profiles was taken over by JSW Steel, till end of FY10, the company owed Rs.7200 crore to 15 banks, it over dues were over Rs.400 crore and needless to say, it was sitting on a huge loss. But in 2010, the IT department raided the company and its promoters and lenders were staring at a Rs.10,000 crore bad loan only on account of this company by end of March 2011.  Now what the auditors of the Banks were doing when the banks provided loans to the overstretched valuation of the company. It simply proves that the assets and financial valuation were inflated by the few Chartered Accountants.   Well this is also proved that the company was not paying salaries, not clearing electricity bills and factories were shut down, plant and machinery was rusting away. While workers suffered to get a decent meal on their table, there was no change in the lifestyle of Mittals – cars, big homes in foreign land, helicopters and helipads and of course, huge loans. For over 10 years, banks knowing fully well that Pramod Mittal’s company was defaulting, gave him one loan after the other – in fact in 2010, when defaulting by Ispat was at its peak, SBI sanctioned fresh loan to the tune of Rs.130 crore, of which it adjusted Rs.30 crore as payment towards previous loan.  This proves my earlier statement about the vicious cycle of the Chartered accountants and banks.
2.       Now please remember the case of Kingfisher Airlines. I hope I don’t needs provide any clarification for this case.

This is how the game of few Chartered Accountants and Banks and Big Cats play the game with tax payer’s money. Now these Chartered Accountants are doing the financial audit and this is their True and Fair position of the Indian Banks and Corporate. We cost Accountants have been demanding to provide the Bank Audit so that we can help the government to identify the malpractices and also the quality of assets being financed. But unfortunately it was never heard and I pray that let Indian banks fails like US and Europe and then only the Government eyes will open and will be able to hear our voice. These non performing assets money goes nowhere but all at the back of luxury living style. Just watch to your professional neighbors growth rest you can understand.

This raises alarm for the corporate India regarding the quality of its books asset valuation and high risk for the overseas investors in India.


hrwayout said…
Hey, very nice site. I came across this on Google, and I am stoked that I did. I will definitely be coming back here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment. Thanks for sharing.
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