Consultancy a struggle for value and ethics

In a twisted turn of events lately consultants hired to help promoters start of projects they recommend are the ones who after doing the project report, corporate advisory and also conducting the forensic audit are called back when the project goes bad.

The RBI is taking this incident quite seriously as well where in the governor did not mince words in downplaying the appalling state of unrest between the big consultancy firms and private and public sector banks.

In a strong contention we see that the governor did not spare the banks  “Today, too many of our project decisions are made by banks listening to the same set of consultants, which means that too few independent views get embedded in the evaluation decision,” Rajan said.

The banks are set to get no respite as some of the loans restructured by them are set to fail and become non-performing assets (NPAs) in the current year.

A glimpse of the current scenario with regards to borrowers and assets in bad debt is given below the information is collected from Indian Express.

Out of around 530 borrower accounts with restructured loans of Rs 4,03,004 crore cases approved by banks, 178 cases involving Rs 67,667 crore have already failed and another 20 per cent is on the verge collapse in the current year, said an official involved with the CDR Cell of banks. Banks are now handling 269 live cases involving a debt of Rs 2, 74,026 crore.

The CDR process, including the status report, of almost all of them are handled by consultants. Bankers indicate that another Rs 55,000 crore is set to fail in the coming months and eventually become NPAs in the books of banks. The biggest case involves a telecom services company with a debt of around Rs 15,000 crore.

The hits just keep on coming for the capital stressed banks as the RBI has closed the CDR window the banks who want to revamp the loans will have to give a 15 % higher provision.

The borrowers have approached the banks hoping the 5/25 scheme, Joint Leader Form, Strategic Debt Restructuring.

Banks have already implemented SDR in some cases and acquired majority stake in companies like Jyothi Structures and Visa Steel.

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