The FM may not interfere with banks functioning directly, but the
Government Nominee and influential Directors nominated can dictate terms
to Bank's Board and get the loans sanctioned to the Corporates at very
favourable rate of interest.Government nominees are very powerful and
they can dictate their own terms perhaps not very apparently.Further,
the bank loans are often cheaper and not subjected to rating and other
terms and conditions compared to funds in the bond market.Bank loans can
be easily defaulted and can be managed even without repayment by a
write off is another option. Further,Procedures to raise bank loans are
comparatively easy and influence works fast. The remote control of the Government on banks is very powerful and before FM thinks,banks would dance.
(This comment appeared in Business Standard in response to the news report "Banks and corporates have entered into a cozy relationship: FM" on 15th December.)
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