How To Manage A Good Credit Rating?
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editricon How to Manage a Good Credit Rating?

Fitch and S & P has downgraded the sovereign rating and also rating of big banks like SBI, PNB, BOB, Axis banks etc. One may imagine the status of real health of smaller banks when big banks like SBI, PNB, BOB , Axis banks are rated poor.There is little doubt in the fact that economic health of Indian banks as well as that of the Indian government is in bad position and unfortunately the same is going from bad to worse quarter after quarter only due to bad politics and bad administration. Asset quality of banks has been totally damaged by bank officials during last one or two decade by indulging in corrupt practices. Similarly government of India under the leadership of Manmohan Singh and Pranab Mukherjee has damaged the financial health of Indian economy and undoubtedly there exists a policy paralysis due to dirty politics of UPA government and due to large scale corruption prevalent in all offices.

 

Government has failed to contain Fiscal deficit, price rise, inflation, trade deficit and other key indicators in the range of sustainable extent. Ratio of Non-performing assets is on rise in almost all publics sector banks despite the fact these clever banks have been applying all their brain to conceal bad assets through restructuring and rephrasing the repayment schedule of loan and credit facilities. Corrupt bank officials are corrupt from top to bottom and they never allow good officers to hold key positions and similarly Ministers of all departments allow only bad officials to hold key positions. Flattery and bribery is the key for any officer in any office to ensure his or her career path and to ensure a peaceful family life. Not to speak of  clerks and junior level officials ,even senior IAS and IPS officials are transferred as per exigencies of work and promoted not as per merit but as per whims and fancies of ministers. Similarly top ranked officials in banks have to toe the line of culture prevalent in Ministries for their survival.

 

It is a system in India to give value to rating agency before taking decision on any project of high value. Similarly sovereign rating is assessed by various international rating agencies. Banks in India have to seek external credit rating of all borrowers having exposure of Rs. 5.00 crores and above. In such position every borrower who has to avail or who has already availed credit facility of Rs.5.00 crores and above from financial Institutes has to get his financial health rated by external rating agencies like CARE, ICRA or CRISIL or other approved rating agencies for the purpose. Unfortunately Rating is not improved by improving the system and by changing the policies and practices but by prevailing upon the officials who are assigned the work of rating.

 

Therefore even if a company is not in a good financial health, the officials of the company as usual and as a set practice pays huge fees , unaccounted comfort fee and offer  costly gifts to manage good rating from rating agencies. The more unaccounted bribe they pay to persons associated with rating agencies the better rating they get in return and in the same way they motivate bankers to sanction credit facility as per their need or as per their demand , justified or unjustified. For this purpose they (all corporate houses and all businessmen)are ready to spend  lacs and crores of rupees on bank officials too in proportion of their credit need to ensure sanction of credit facilities in time and without raising much queries .

 

When bank officials and corporate can manage good rating from rating agencies, auditors and other regulating agencies, government can also manage the same from rating agencies by paying some comfort money, by extending red carpet welcome, by helping kith and kin of persons associated with rating agencies or by extending helps to people of rating agencies in other sphere of life.

 

This is India where anyone can manage any powerful official by paying bribe and by extending red carpet welcome. Lawyers, Chartered Accountants, Valuers, Tax officials and all other officials who has power to sanction benefits to their customers or who may provide comfort to their clients , can be managed by payment of bribe in cash or in kind. Indians have to pay bribe money or say comfort fee to all in government departments, banks and insurance companies right from peon to highest post in the department. It is therefore possible that ministers and key officials who were entrusted the duties of handling officials of rating agencies have failed to persuade and motivate rating people to give good rating.

 

When rating of banks in USA was downgraded and when rating of USA was downgraded by S & P last year, Obama led government made all efforts to improve the financial health of the government and that of financial Institutes. In India politicians blame officials of rating agencies for bad rating and they do not like to admit their failure in providing good governance and their failure in gauging the health in right time and in taking all reformatory steps including Jan Lokpal to improve the financial health of the government and that of the banks.

 

It is worthwhile to mention here that the present central government did not fail to teach a lesson to followers of Team Anna and Ramdeo who are raising voice against Corruption and Black money because they understand very well that black money is the key of all locks.

 

When corruption has become the system in India, it is not astonishing and unusual for the government to use corrupt ways and means to acquire better rating from rating agencies so that a positive thinking prevails in the fiscal market as also that in international arena.

 

After all corruption is the key behind all successes.

 

There is an old proverb, “While in Rome, do like Romans”.

 http://jaindanendra.blogspot.in/2012/06/why-rating-is-downgraded.html

 

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