Boosting Loan Disbursements

To quote from today's Financial Express:

 “The loan growth has all been sluggish. The increase in non-food credit was flat at 0.1% between March and September this year, even over a longer period in the year to September 24, the growth is modest 6.8%. Again, much of this has been in the form of retail loans because banks claim that there is little demand from the companies. To be sure, there has been a fair bit of disbursement under the Emergency Credit Line Guarantee Scheme- the scheme promoted by the government to help MSME’s, a chunky 3.5 – 4 lakh crores has been lent to smaller companies. Even if banks fear that some of this may not come back – the government offers only a partial guarantee- they have been fairly enthusiastic about the ELCGS because the government has backed the scheme.

As such when risk aversion is running high, the government probably needs to initiate more of such schemes. There are those who will argue that it has a fiscal cost, in the event some of the bad loans go bad, and, therefore, risky. But, it is a risk worth taking because it could create a virtuous cycle and give the nascent recovery the necessary push. The fact is that bankers remain wary, even scared, of taking risks; they are reluctant to lend to companies with a credit rating below AA. They have made it amply clear that they do not intend to take even the smallest risks. While it is their business to take calculated and measured risks, the problem is they fear harassment in the event an exposure goes bad. Given how some banking executives have been treated so badly, it is a justified fear.

 

Last week, the finance ministry came up with accountability guidelines – for loans that carry some risk of default- to help ease the anxiety at public sector banks. From April next year, public sector bankers will not be held accountable for 'bonafide’ loans of upto Rs. 50 crores going bad. Moreover, banks have been given some flexibility on the scrutiny of smaller assets – in the region of 10-20 lakhs. These guidelines are helpful, but the threshold needs to be raised. While we cannot have malfeasance, bankers cannot be harassed and taken to task for every loan that goes bad. If the government wants to push credit, it needs to reassure bankers it is taking legislative steps to protect them. The level of risk aversion is threatening credit flows that cannot be good for the economy.”   

 

A key solution to this vexed challenge lies in a tie-up with some of the reputed management consultancies, which can can lend confidence to the banks. This would be by offering their services for some of their loan borrowers, who may be in need of expert advice to make best possible use of the loans so borrowed. So besides loans, the banking sector can also offer hand holding services to some of its borrowers via such kind of a tie-up with reputed management consultancies. Those borrowers availing of such services can possibly be given a preferred rate of interest by the banks, due to relatively low level of risk of defaulting.

 

Thus, while such a tie-up can prevent some loan borrowers of the banking system from turning into NPAs, thus proactively addressing “twin balance sheet problem”, it would also help such loan borrowers avoid insolvency related procedures which may even threaten the very existence of such businesses. Reputed management consultancies can keep the banks posted regarding the overall progress of such loan borrowers post disbursal of loans to them, so that there are no negative surprises when it comes to repayment of such loans. 

 

On a positive note, some of such loan borrowers can also be hand-held towards a better path to progress, which in-turn would also benefit the banking system via getting timely repayments of interest and the principal amounts due, besides significantly contributing to our overall economic revival.

 

For such reputed management consultancies, the benefit would chiefly be in terms of greater market penetration, adding to its revenues through fees from the banks with whom such a tie-up is made, as well as some of their loan borrowers which avail of such services.

 

Thus, such an arrangement would be a ‘win-win-win’ for all the three participants, that is- the banking system, reputed management consultancies so associated, and the loan borrowers. Attendant multiplier effects in the economy as a whole in terms of greater employment, boost in overall demand, improved tax collections etc, would be a natural by-product of such an arrangement.   

  

Challenges for some of the listed Unicorns

Three key factors which any potential investor need to consider while considering an investment in any enterprise are :

1. A definite and lasting 'unique competitive advantage' commanded by that enterprise in its industry,

2. Able top-level team running the show committed to ethical and transparent corporate governance practices, and

3. Clear path-to-profitability which is demonstrated on a consistent basis periodically via beating the market expectations.

These three factors also need to be kept in mind by all those tech based unicorns, which have either already listed or are about to be listed on our stock exchanges.

Their astronomical valuations simply on the basis of some 'hidden value' seen by some investors, is indeed worth applauding, but this is where their main challenge lies.

They now need to convince their innumerable shareholders and other key constituencies, that their 'unicorn status' was not devoid of any merit.

Thus, by first getting their act together in terms of strategic planning backed by laser-like execution, and then consistently interacting with the media and various analysts, to effectively demonstrate that they are on the right track to deliver superlative returns to their shareholders, and without compromising on any ethical and transparent corporate governance standards, would such unicorns command the necessary confidence among all their key constituencies, both internal and external.

That, by commanding such kind of confidence, would such enterprises become the latest icons of our corporate world is anyone's guess.

Ever-increasing petrol and diesel prices. Some options

Given the severe hit which even the OPEC economies had to suffer last year due to pandemic related restrictions worldwide, which saw the crude prices plunge to negative territory, it would be unrealistic to expect them to pay heed to our request to beef up the supplies to keep the crude prices in check ,so as to serve ours as well the interests of other major importers of crude oil.

It's but natural that OPEC countries too are now trying to recoup their losses, given the fact that their respective economies too have suffered. Given such a situation, it's now anyone's guess that the international price of crude oil would cross $100 per barrel by December when it's demand peaks.

That the ever increasing retail prices of petrol and diesel can have major negative impact on our economic revival, is certainly not lost on our policy-makers. And, at this rate given the limitations of our government because of which a cut in taxes on the same is currently being ruled out, the retail prices of petrol and diesel by the year end is anyone's guess.

Some options worth considering are:

a) Issuing oil bonds or revisiting our fiscal deficit targets to defer the costs of increasing oil prices for another few years ,when it is expected that our economy would be back on its' all-inclusive growth trajectory. But simultaneously, keep up with reforms in various sectors, and keeping all key domestic and international constituencies well-informed consistently, on our plans to ensure macro-economic stability while pursuing our 'growth without pain' strategy,

b) Try working out a quid-pro-quo relationships with each member of OPEC for mutual assistance in our common overall economic objectives. It is well known that OPEC is not a monolithic entity, and each member has its own priorities and compulsion. A rupee trade or a barter deal involving oil imports from them and access to our technology and market could be a key element,

c) Actively working with some European nations and China to ensure the revival of US-Iran nuclear deal, thereby leading to lifting of all sanctions against Iran. This would force OPEC to boost oil supply thereby leading to softening of oil prices,

d) On a parallel note, working out more reliance on Iran as a trusted supplier of energy, and on a quid-pro-quo basis to address its needs post pandemic, and

e) Other measures such as thrust on non-conventional energy sources etc, need to be kept on track with as many international alliances as possible, especially given the urgent need to combat the threats of climate change confronting the planet as a whole. But, these would take their own time to yield dividends.

Top-end Movie Theatres and Star-Rated Hotels

With both top-end movie theatres like PVRs etc struggling to win back audiences, and hospitality sector (except those in leisure or holiday destinations) struggling to win back guests, it would be great if both join hands to woo the same target audience.

Certainly, those movie-goers who can afford movie tickets worth a few hundred rupees, could as well be potential target audience for star-rated hotels as well. Thus, if both these segments undertake cross-promotional activities for each other's benefit, it could be of mutual benefit to each other.

Going further, both such businesses could conceptualize an eco-system, whereby the complimentary needs of the same target audience could be addressed by different businesses forming such an eco-system. Furthermore, cross-promotions by each such business would enable everyone to reap benefits from synergies evolving from such an arrangement.

The basic principle underlying such an idea is:

"Wherever the target audience of a business congregates, be it in any physical or any virtual environment, there exists scope for a targeted marketing activity, with an aim to address complimentary needs of such a target audience"

Re-imagining LinkedIn

Re-imagining 'LinkedIn' by making it the ‘first port of call’ for anyone seeking help, such as:

•  An individual seeking employment opportunities, or fame, or recognition,
•  Start-ups desirous of reaching out to potential investors or customer base in a highly cost effective manner,
•  Businesses seeking to identify the extent of awareness and perceptions regarding their products/services, among their intended target audience through focused communication strategies, and
•  Progressive organizations experimenting with out-of-the-box techniques for identifying the right talent, etc

Broad outline of the strategies to accomplish the same could include the following:

• Re-imagining recognitions and appreciations on one’s posts which currently are generally limited to ‘likes’ and ‘comments’ or ‘shares’ through one’s own circle of friends on LinkedIn. Create a “Hall of Fame” in LinkedIn, where certain individuals or groups who have surpassed certain standards in the quality and popularity of their posts or professional accomplishments in their respective fields, are granted recognition in this coveted section. And what’s more, this section can be viewed by any member in LinkedIn,
• Re-imagining motivations to post something meaningful on this platform. Going beyond the number of ‘likes’ ‘comments’ or perhaps ‘shares’ of one’s posts from one’s own circle of friends. Allow any ‘worthwhile post’ to be accessed by even those who are not a part of one’s friend circle by creating a section say “Special posts” where some worthy posts can be placed and viewed by any one who is interested. The definition of ‘worthwhile post’ can be in terms of it’s relevance, clarity of thought, articulation, and depth of knowledge in the particular domain. Such posts can be placed in the section of “Special posts”. Certainly, this can facilitate interactions between those who are not connected to each other in LinkedIn which can be an important motivator,
•  Re-imagining support to promising start-ups. A separate section for promising start-ups to showcase their respective venture ideas, quality of talent driving such ventures, milestones reached, and strategies under consideration for future growth. Any interested venture capitalist or talent desirous of being part of their success journey can then always connect with the respective ventures on a one-on-one basis,    
•  Re-imagining the way businesses connect with their target audience. For example, by organizing contests on LinkedIn by such businesses, to identify extent of awareness or familiarity of sample of their target audience, their opinions, perceptions etc. with regard to the products/services of such businesses.  Such inputs can then serve as a valuable source of information for such businesses for key decisions while working out their product strategies or service offerings, as well as for their marketing communications. Attractive prizes could be sponsored by such businesses for those members who offer useful insights and suggestions, which yield good dividends for such businesses in terms of improved toplines and market share,
•  Re-imagining hiring techniques by some of the progressive corporates. For example by organizing contests on LinkedIn to identify the analytical abilities and attitudes of their potential talent pool. Such identified talent can serve as a valuable resource pool  for such progressive corporates who can be considered at an appropriate time by further evaluations and interviews etc, and
•  Re-imagining talent contests for the entertainment industry on similar lines as above. Specifically, now the entertainment industry too is looking for a new paradigm for revival post the pandemic. Why not use LinkedIn as one of the key mediums to elicit some insightful ideas, sample videos of some promising talent etc to arrive at the new paradigm for revival?  

More of such innovative ideas can be deliberated upon.

Ford and General Motors

Without knowing exactly why did Ford and General Motors not succeed like Maruti and Hyundai in the Indian market, basic perception suggests that they needed to realize that now vehicles are more of "computer on wheels", thus needing constant R&D based on customer feedback, besides needing to adopt a high class service oriented mindset.

It's just not enough to leave the service aspect to the dealers, but rather requiring a constant connect with the end users by leveraging latest technologies, to guage their perception and needs.

And finally, like in a war where it pays to have strategic allies to help with intelligence inputs, air cover, logistics support etc, similarly in such a tough market scenario it pays to enter into strategic alliances with key focus on arriving at best possible overall value-proposition to the customer.

Return-to-office

Notwithstanding the various digitalization related initiatives undertaken by various organizations to support work-from-home during the pandemic, a key element of return-to-office should be an empathetic human touch in adequate proportions to re-assure employees, of all possible support.

Such a human touch is vital to remove any anxieties (real or imaginary) which the employees may have, as almost everyone would have felt the impact - either recovery from a bad infection, or loss of a dear one/s due to Covid, or severe impact on one's personal income due to salary cuts or leave-without-pay etc.

Also, the role of family members too need to be acknowledged as they too have played a vital role during the work-from-home phase, to ensure unhampered productivity of their respective family members.

Yes, technology should supplement human touch during such challenging times, not replace it.