Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

After last few years of tough ride owing to burgeoning bad loan problem in public sector banks and specter of under-reporting of non-performing assets (NPAs), the Indian banking industry’s public credibility and investors’ confidence were jolted by Nirav Modi ‘scam’ that exposed the PSU Punjab National Bank (PNB) to over INR 11,500 Crore fraud. Though we may have a different view on the entire Nirav Modi episode, we tried to study at ground level, how the banking business is being done and what are the innovative ways followed by the corporates while borrowing from the banks and how banks are managing their balance sheets.What our research points out is that the Nirav-PNB saga might be followed by greater shocks in the near future as the Indian banks face the unleashing of the ugly side of three borrowing innovations each loaded with calamitous outcomes.Most of such innovative product offerings are nestled in the real estate sector which is under duress for a long time with normal bank lending channels almost blocked for the sector. To overcome such tough situations, various consultants in the markets sometimes along with understanding with financial institutions (FIs) have devised various innovative products to raise funds from the FIs at affordable rates and in a less cumbersome manner. Few of such product offerings specifically for Real Estate Firms are:<ol><li>Proxy Investor/ Profile Investor</li><li>Trade Finance route</li><li>Promoter Funding through PSL route</li></ol>

After last few years of tough ride owing to burgeoning bad loan problem in public sector banks and specter of under-reporting of non-performing assets (NPAs), the Indian banking industry’s public credibility and investors’ confidence were jolted by Nirav Modi ‘scam’ that exposed the PSU Punjab National Bank (PNB) to over INR 11,500 Crore fraud. Though we may have a different view on the entire Nirav Modi episode, we tried to study at ground level, how the banking business is being done and what are the innovative ways followed by the corporates while borrowing from the banks and how banks are managing their balance sheets.What our research points out is that the Nirav-PNB saga might be followed by greater shocks in the near future as the Indian banks face the unleashing of the ugly side of three borrowing innovations each loaded with calamitous outcomes.Most of such innovative product offerings are nestled in the real estate sector which is under duress for a long time with normal bank lending channels almost blocked for the sector. To overcome such tough situations, various consultants in the markets sometimes along with understanding with financial institutions (FIs) have devised various innovative products to raise funds from the FIs at affordable rates and in a less cumbersome manner. Few of such product offerings specifically for Real Estate Firms are:Proxy Investor/ Profile InvestorTrade Finance routePromoter Funding through PSL route

India

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Three Gorges Could Damn Indian Banks

After last few years of tough ride owing to burgeoning bad loan problem in public sector banks and specter of under-reporting of non-performing...

Nitin Mangal

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