Institutional & Individual Creditor Rating
Cellphones have provided a whole world of convenience at the finger tips! The telecom boom resulted in new industries where Telemarketing flourished. In a day there are endless calls from unknown numbers - strange voices and accents all pitching to make a sales! As I have lead Transitions and Project Management for many IT and BPO Transformations initially I had all my sympathies for the Tele Marketers. I have headed Outbound and Inbound Sales and Verification Processes. I have counselled young ones under fire from irate customers! So out of empathy and guilt I have gone through many calls as I know the other person is doing his/ her job, and performs a duty that earns them a salary. I have politely listened to the scripted conversations and answered accordingly, wishing that they have a good day, just in case a Quality Analyst is grading them on my call treatment.
Later years, trudging through life, multitasking I have spoken in an impatient voice asking them to kindly strike me up against a 'Do Not Disturb' List as I did not want to be called again. The last thing on my mind while running down an Overhead Bridge to jump into a Mumbai Local was buying a American Express Credit Card for Life! Jostled in the early morning rush in a Ladies Special, I did not want someone asking if I want a Car Loan!! Pushing a trolley in the Super Market, standing on my toes to lift cartons from racks I did not want to talk to Callers offering to transfer my Personal Loan at a Lower Rate! In the pre- Truecaller days, one was a gullible fool, playing right into the hands of Tele-Callers with endless "No Thank You, I am not interested" conversations! Now, right or wrong, when i see an incoming Calle ridentified as Spam, or anyone of the Banks / Insurance or Broking Firms, I just BLOCK the caller with aplomb!!!
In Corporate jobs, provider organisations host Special Desks/ Offers/ Relationship Managers that make Customised Offerings to staff for all Banking Needs, Loans being the most popular offerings. However, once you have got into a discussion the next step is a laundry list of documents that the Banker requests as a Pre-requisite for loan Sanction. Most are easily available such as 3 Months Salary Slips, 5 Years Bank Statement, Address Proof, Age Proof, etc, however after submitting the reams of certified Photocopies a loan approval is still kept dangling till CIBIL Scores get added. This is pulled out by a banker from a Centralised Database available to the BFSI Fraternity.
A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting.[1] The credit rating represents an evaluation of a credit rating agency of the qualitative and quantitative information for the prospective debtor, including information provided by the prospective debtor and other non-public information obtained by the credit rating agency's analysts. Credit reporting (or credit score) – is a subset of credit rating – it is a numeric evaluation of an individual's credit worthiness, which is done by a credit bureau or consumer credit reporting agency.
In India CRISIL is the leading Enterprise Credit Rating AGency and ICRA the Individual Credit Rating organistion. There may be many more. Globally, country scores have different INdexes MOODYs being a top ranking one.They track and study and analyse patterns of repayment, whther it is a EMI Default, or delayed bill payments, or deferred credit card repayment, or non payment of annuity due .. whatever !! Based on traits and patterns of an Individual, unbeknownst the CIBIL rating would be calculated. God forbid that you fall "Low", then after all the endless calls and promises to offer loans, for a change the Banker will start running and dodging your calls!
- I can understand that Waryam Singh did an Insider Job to favour and sanction loans to Rakesh and Sarang Wadhawan.
- I can understand that the Head of Sales in PMC Bank was probably well taken care of to sanction Loans to repeat defaulters.
- I can understand that Head Recoveries of Loan / Credits in PMC Bank may have been on the gifting list of the Debtors.
- What I fail to understand is HOW did the Father - Son Scamster duo manage to get their Credit Ratings at respectable levels?!?!?!?!?!?!?! HDIL has been in the Red, underperforming and under loans from multiple Nationalized and Private Banks. Both of them have personal loans with default. So whether CRISIL (for Corporate) or ICRA (for Personal) did the rating, they would have definitely had a bad score! In which case, NO BANK could honor a loan to them. HOW did PMC Bank Management conceal the Bad Rating Scores?
Leave aside the concealment. Let us consider the rules that Reserve Bank of India has declared for all banks, how is it that the fraud went undetected for this long?
?GIST OF RBI SCHEMES OF DEFAULTER LISTS
1. Scheme on collection and dissemination of information regarding defaulters of Rs.1 crore and above
1] RBI MANDATE - PG 1 of 3
1. Scheme on collection and dissemination of information regarding defaulters of Rs.1 crore and above In its circular DBOD No.BC/CIS/47/20.16.002/94 dated April 23, 1994 Reserve Bank of India (RBI) has advised the scheduled commercial banks and financial institutions (FIs) that the Hon'ble Finance Minister in his Budget Speech on February 28, 1994, announced that in order to alert the banks and financial institutions (FIs) and put them on guard against borrowers who have defaulted in their dues to other lending institutions, the RBI was putting in place arrangements for circulating among banks and FIs names of defaulting borrowers above a threshold limit. He further mentioned that the Reserve Bank would also publish a list of defaulting borrowers in cases where suits have been filed by banks and FIs.
OBSERVATION / PMC DEPOSITOR ASK : HDIL / Rakesh and Sarang Wadhawan have been defaulters from 2011 onwards. How mant times were they reported?
2] RBI MANDATE - PG 2 of 3
The term 'diversion of funds', referred to at para (b) above, would be construed to include any one of the under noted occurrences:
i. Utilization of short-term working capital funds for long-term purposes not in conformity with the terms of sanction;
ii. Deploying borrowed funds for purposes/activities or creation of assets other than those for which the loan was sanctioned;
iii. Transferring funds to the subsidiaries/Group companies or other corporates by whatever modalities;
iv. Routing of funds through any bank other than the lender bank or members of consortium without prior permission of the lender;
v. Investment in other companies by way of acquiring equities/ debt instruments without approval of lenders;
vi. Shortfall in deployment of funds vis-à-vis the amounts disbursed /drawn and the difference not being accounted for. The term 'siphoning of funds', referred to at para (c) above, should be construed to occur if any funds borrowed from banks/FIs are utilised for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgement of the lenders based on objective facts and circumstances of the case. Certain penal measures have been stipulated against the wilful defaulters and others in the above-said circular.
OBSERVATION / PMC DEPOSITOR ASK : Rakesh and Sarang Wadhawan have diverted funds using almost all of the above listed occurences. Was RBI aware of the misapprobriation of funds?
3] RBI MANDATE - PG 2 of 3
The term 'siphoning of funds', referred to at para (c) above, should be construed to occur if any funds borrowed from banks/FIs are utilised for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgement of the lenders based on objective facts and circumstances of the case. Certain penal measures have been stipulated against the wilful defaulters and others in the above-said circular.
OBSERVATION / PMC DEPOSITOR ASK : Rakesh and Sarang Wadhawan have siphoned off funds to family, firends, on personal fantasies, and splurged on lifestyle including bollywood parties and projects. Did bankers trace or follow any of these happenings? Did RBI question the diversion of funds? Rakesh Wadhawan was on Interpol Warrant List - how did a bank miss such a big piece of information?
4. Collection and dissemination of information on defaulters by CIBIL
4] RBI MANDATE - PG 2 of 3
Under the above schemes, RBI also was periodically collecting and disseminating credit information on suit-filed accounts of defaulters till the year 2002. However, in terms of circular DBOD o.DL.BC.111/20.16.001/ 2001-02 dated June 4, 2002, banks and financial institutions (FIs) have been advised to submit information on defaulters list (suit-filed accounts) of Rs.1 crore and above and willful defaulters list (suit-filed accounts) of Rs.25 lakh and above as on March 31, 2003 and onwards, to Credit Information Bureau (India) Ltd. (CIBIL) only and not to Reserve Bank of India (RBI), as CIBIL will be taking over dissemination of same and Reserve Bank of India will continue to deal with, as hitherto, data relating to non-suit filed accounts of defaulters list of Rs.1 crore and above and willful defaulters list of Rs.25 lakh and above, which are disseminated only to banks for their confidential use.
OBSERVATION / PMC DEPOSITOR ASK : Rakesh and Sarang Wadhawan have been defaulting on ALL payments to Institutions. They were high profile defaulters with loud lifestyles, how did CIBIL miss their bad debt? How did CIBIL allow them credit rating for Loan sanctions?
The case gets murkier. On the day of their arrest Rakesh and Sarang Wadhawan signed a handwritten statement declaring to ED / EoW that their personal assets may be mortgaged and used to repay loans to PMC Bank. However in more than 100 days teh Police and Investigating agencies ahve not done the needful. Loans were made against personal guarantees, collaterals and assurances. Incase of a Cooperative Bank, the process is simple, incase of Bad Debt / Default / Non repayment, encash collateral by making a plea in HC and liquidatign the asset within a week. Sinne both the guilty have agreed there is NO SHOW STOPPER. WHY then are the assets still nto auctioned off?
Stranger is RBI's plea in HC, seeking a stay order on the sale of assets pledged by Wadhawans. If the sale can help Revive PMC Bank, and get back the operations to full speed WHY IS RBI opposing the same?
PMC Bank scam: Wadhawans ready to sell yacht, BMW, other assets to pay off dues
Article 7 of a Series #RevivePMCBank, #SavePMCBank, #Davos2020,#Davos20, #WEF2020, #wef20, #IMF, #InternationalBankersForum, #WorldEconomicForum, #GeorgeSoros, #BIS
REFERENCES
Wikipedia , https://en.wikipedia.org/wiki/Credit_rating
GIST OF RBI SCHEMES OF DEFAULTER LISTS, https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/63417.pdf?fbclid=IwAR1PojcsKWcKB5cNTwWKb7X3vEgG2n-34gMeU7kEz4NmEFG6HKYL30Eqt00
CRISIL, https://www.crisil.com/
ICRA, https://www.icra.in/
Cheers
Jugnu