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Reining in `glamour boys' and NPAs

Shaji Vikraman

EARLY last year, at an informal meeting in Delhi, one of the top bosses at the Finance Ministry held court on the Indian financial sector. Loosening after a couple of drinks, the top boss shed the famous, ``read my lips'' approach, which he and some of h is colleagues at North Block are adept at.

According to him, the gravest threat to the domestic financial sector emanated from the Indian financial institutions. While he and a minority section in the Ministry were convinced that the ``glamour boys'' among the three or four FIs had to be reined i n, others in charge obviously did not share this view.

This year, at a dinner hosted by the Ministry after the Budget, an official, practising his golf swing during the chat session, was irked when the dubious practices adopted by one of the glamour boys came up for mention. No, they are progressive and doin g fine, so what is the problem, he wanted to know.

Quite a pity, for the next day, a report laid bare the high NPA level of the FI.

Now, months later, the Finance Ministry says that it is time to look at the state of health of the FIs, after the NPAs level hit double figures. Suddenly, the Government is also making noises about providing a level playing field for the State-owned IDBI vis-a-vis the high profile ICICI. The dawning of this realisation is reflected in the capital restructuring package cleared for the IDBI.

As was done in the case of PSU banks, the Finance Ministry is expected to work out a schedule for stemming the NPAs at a meeting which the Finance Minister is expected to have with the chiefs of some of the FIs next week.

For the Finance Minister, the most important meeting this week is the one on June 22, where he is expected to push for speedy implementation of value-added tax (VAT). For States which are now hankering for aid from the World Bank, there might be no other go. The bank has made it clear that tax rationalisation will have to figure at the top of the agenda for any State, if the purse strings are to be loosened.

The Government has also offered the hope that States like Bihar, which have not followed the ground rules set for a uniform sales tax regime, will be reined in, perhaps by a veiled threat of sniping of assistance which New Delhi provides. Pondicherry, th e tiny Union Territory, may be mollified through an offer of a grant.

This meeting will be preceded by another one organised by the Finance Ministry on June 21, to discuss as the cliche goes - belt tightening measures. There is a great deal of resentment among various Ministries and Government departments at the cold and r uthless manner in which the Finance Ministry deals with their proposals. However, the preacher (MoF) is never found wanting when it comes to arranging junkets abroad including one to the city of casinos, Las Vegas, say peeved officials who sit on the oth er side of Raisina Hill.

The media has also drummed up reports about a meeting of the Cabinet this week on disinvestment. There are indications that this meeting may not take place at all though considerable newsprint has been expended on this topic. Despite talk week after week on disinvestment, letters mandating some investment banks as global advisors are yet to be given, months after the selection. Up against the spin employed by some of the administrative Ministries to thwart the divestment, some efforts are on to put an e nd to this.

The solutions on offer include - yanking away from the control of the administrative Ministry a PSU where the Cabinet has approved of a majority disinvestment and transferring control to the Department of Disinvestment, a strict time-table to be maintain ed for the sell-off and the like.

Brave solutions; but as the Minister, Mr. Arun Jaitley, said once, the action on disinvestment is more in the newspapers, or rather on paper.