Dumped down under

An unfortunate fallout of the ongoing turmoil in the financial sector is the prospect of a complete destabilisation of the finance business, what does not augur well for a growing economy. The contribution of NBFCs to nation-building has been a very unique one and they offered a welcome alternative to the inert nationalised banks, both in terms of better interest rates and quicker disposal of loan proposals.

It would not be an exaggeration to say that the growth of the NBFCs has been a major factor in fuelling demand for goods and services which is an important indicator of all-round prosperity.

But with the sudden invasion of the hordes of fortune hunters, who sensed a lifetime opportunity to make a fast buck, the relative tranquillity of the finance business was disturbed, with euphoric greed getting the better of sane judgement. Anything in excess is poison, more so in the world of finance which is a very brittle business that hangs by the fragile threads of integrity and discretion.

It was only a matter of time before those threads snapped as the traffic simply couldn’t bear that much rush of gold diggers. Though even a mere adverse rumour is enough to finish off a sound venture, the business cannot also be run purely on hype. But alas, that is what has happened with most bogus companies now answering the inevitable call of gravity with a thud leaving multitudes of investors in mid-air.

But to claim that the depositors have been the biggest losers in this reckless game would be gross understatement of the damage wrought by the turmoil. A calamity of a bigger magnitude now stalks the sector as a very basic raw material of the finance business, Confidence, is now in short supply.

And when one says confidence, one is not merely referring to the investor’s confidence, which in any case will find other avenues. What is distressing is the gradual erosion in promoters’ confidence in their own businesses which has been brought about by a plethora of factors. Such a trend can only spell doom for the business which is a very vital propellant of industrial growth.

Though stock scams and bank frauds led to the tightening of liquidity to this sector, which is not exactly on the priority list, the government has also contributed its bit through overnight regulations that only strangulated the business further. The finance business has always been a well regulated one..that is, on paper.. with a flurry of legislation and a maze of rules and orders governing it.

But in reality, it has always remained vulnerable to the machinations of zealous operators who knew their way around, as plantation pistas and dabba-car dealers have proved to our distress. The RBI woke up with a start and all its subsequent actions have been delirious. For starters, it promptly published a list of rogue companies that the investors should be wary of but it was of little enlightenment and no use, as the public had already learnt it the hard way.

Then in a bid to ‘reform’ the financial sector, the departments concerned which showed no concern till then, started issuing do’s and dont’s and imposing restrictions in such a flurry that the NBFCs suddenly found themselves in a quick sand. One can reel out numerous such regulations that progressively pushed the finance companies towards doom, making the business wholly unviable as the rules stand today.

Particularly harsh, just to name one, was the fatwa to all NBFCs to forthwith bring down their deposit levels, a stipulation that even government-owned nationalised banks may find had pressed to implement. Faced with dwindling investor confidence on one side and its sudden rogue status in the eyes of the authorities on the other, the finance business is today an entrepreneurial nightmare.

There is now another spoil-sport who have also lent their long arms to the free-for-all assault on the finance companies. The cops in general, and the TN breed in particular, have never been known for refinement and most often they excel their captives in villainy and rowdyism.

But then, that may be an effective method, albeit dubious, when dealing with pick-pockets and pimps, but tackling white collar criminals is a sophisticated art. However, the lathi is no respecter of such distinctions and is now on the rampage, felling everyone who is unfortunate enough to come into its sweeping arc.

Having allowed all the real culprits to slip through their porous fingers, the police, have now suddenly lapsed into a virtual arrest spree. Taking umbrage at the reprimands of a judge in the Anubhav case, wherein he pulled up the police for being slack, the guns have now been trained on even innocent persons based on vague suspicions with all finance companies, be they good, bad or ugly, coming under the blanket purview of the cops.

Of course, we know that the acts of the police are a typical knee-jerk reaction, and will cease once they have shown enough ‘performance’ for the record. But this frency has already rattled the entire business community and threatens to snowball into a major crisis for several company managements.

Lawyers, chartered accountants and consultants who had all lent their names to the boards, are now the favourite whipping boys of the lawmen. There is no effort to even find out if the person was involved in the day-to-day affairs of the company or if he had played any part in the debacle of the company.

Even names of directors who were on the board when the deposits were accepted or had served in the past, are not spared and they are obliged by a visit by the local constable, most often at midnight usually in the guise of postmen delivering telegrams! All this is okay if there is at least some information or a reasonable suspicion linking the person to the fraud.

But beyond the perusal of the company records that can throw up the list of the persons connected with it, the arrests do not seem to be backed by any credible evidence. But then, only the courts need evidence; the police want only suspects! There is a lighter side to the whole episode, though. If the police are around, can grease be far behind?

The grapevine has it that now all one has to do to get back one’s deposit is to grab a friendly policeman, do the ‘needful’ and he would talk to the company management to secure your money. And all a company CEO has to do to evade a depositor is to, you guessed it, do the ‘needful’ to the chap in the khakis and you are through, atleast temporarily till he can arrange a bail. Who said the cops are not being fair to all?

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