Biggest winner of Modi’s loan-in-59-minutes plan for small companies is an Ahmedabad fintech startup

On November 2, Prime Minister Narendra Modi made a slew of announcements aimed at reviving India’s faltering micro, small and medium enterprises. One of these was about a dedicated digital platform – www.psbloansin59minutes.com – to enable them to access loans of upto Rs 1 crore in just 59 minutes.

Unlike their larger counterparts, India’s smaller companies have long faced difficulty in accessing bank loans. The psbloansin59minutes website was presented as the solution. Once a firm uploads key information such as tax returns and ownership details, proprietary algorithms on the website appraise the application, determine the loan amount that can be given and then connect the applicant to a bank branch – all in under 59 minutes.

As it turns out, the website mirrors the aims outlined in a tender issued by the state-owned Small Industries Development Bank of India on January 22, seeking to hire a consultant to set up a new legal entity that would facilitate contactless lending.

“The solution will use algorithms and techniques to read complex balance sheets, IT returns and bank statements in a very short time,” said the tender. “These solutions can easily capture the basic details of the applicant from present documents. Smart analytics will enable the proposed solution to find discrepancies and automatically pull information from credit bureaus. More importantly the decision-making process for a loan officer can become simpler as the solution provides a summary of credit, valuation and verification on a user-friendly dashboard.”

The tender went on to define eligibility requirements. To qualify, consultants needed to have earned a fee of at least Rs 50 crore from management consulting during the three preceding years. “The consultant should have been in existence in India since April 01, 2012,” it stipulated.

Once a consultant was shortlisted, said the tender, a new legal entity would be formed, in the form of a company with SIDBI and other banks as shareholders.

However, a closer look at psbloansin59minutes shows that the company behind it does not quite meet the tender stipualtions. The website is not run by a new legal entity as envisioned by the SIDBI tender. Instead, it is run by a Ahmedabad-headquartered fintech company called CapitaWorld Platform, which was set up in 2015.

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Arun Jaitley is being disingenuous in blaming RBI for the troubles of India’s small and medium firms

What India’s Finance Minister says…

The finance minister this week criticised the central bank for failing to check indiscriminate bank lending from 2008 to 2014 which has now ripened into a bad loan crisis. The attack was accompanied by the government invoking never-used powers under the Reserve Bank Act to issue directions to the bank’s governor, Urjit Patel.

What he stays mum on…

If the MSME sector was tottering by the time Arun Jaitley became India’s finance minister, the next four and a half years felled it.

First came demonetisation. On November 8, 2016, the government suddenly announced that Rs 500 and Rs 1,000 notes were no longer legal tender. This created an unprecedented cash shortage in the country. As economic activity dropped, households and small businesses took a beating.

Less than a year later, on July 1, 2017, came another shock. The Goods and Services Tax was introduced even before the MSMEs’ turnovers had returned to pre-demonetisation levels. As Scroll.in reported from Gujarat at the time, India’s new tax regime for businesses favours formal economy players more than those in the informal economy – which is entirely made up of MSMEs. In South India, high tax slabs pushed MSMEs in the automotive cluster of Hosur into the red, forcing them to take bank loans to pay taxes.

While firms were still grappling with the new tax regime and figuring how to survive, there came the cash crunch of December 2017. As Scroll.in reported, multiple reasons were at work, including a collapse of the government’s cash distribution protocols.

From a quick comment published today on the government’s attempt to pin blame on MSME distress on the RBI.

India’s curious inflexibility in trying to fix its bad loan crisis is leading to unforeseen problems

India’s crackdown on companies that have defaulted on loan repayments is reshaping the country’s economy in fundamental ways. As the first three articles in this series detailed, competitive advantage is being tilted towards larger firms because only a handful of buyers is picking up most of the insolvent firms on sale. Between the resulting consolidation and the fact that most of these firms are changing hands at low rates, existing companies will struggle to compete. In addition, regional companies are being pushed into businesses beyond their core strengths.

These processes have been in motion since January 2016, when India’s banks, prompted by the Bharatiya Janata Party-led government and the Reserve Bank of India, started taking defaulting firms to the National Company Law Tribunal in an attempt to recover outstanding loans.

These structural transformations have been caused by the curious inflexibility that characterises India’s insolvency proceedings, which place the blame for bankruptcy entirely on the firm’s promoters, experts said. “The government is not making any concessions,” complained the chief financial officer of a steel plant in Chhattisgarh which has slipped into insolvency proceedings. “It is just putting the project up for sale.”

Inflexibility also shows in how these distressed projects are being rehabilitated. This is obvious from the way the proceedings have unfolded for a thermal power plant set up some 10 years ago by a well-regarded business group in North India. The group’s chief financial officer, who is in his mid-50s, said in his 35-year career, he has never seen anything similar to India’s bankruptcy proceedings that his unit is now facing.

We have the fourth — and concluding — part of our series on India’s insolvency proceedings out today. The first part, to recap, had flagged some curious patterns showing up as companies change hands to argue we need to pay more attention to these proceedings.  The second looked at the handful of buyers picking up most of these stranded assets. The third looked at what this means for local capital as global capital (and big capital) comes in.  Today’s piece builds on those observations, using them to point out the self-damaging inflexibility that characterises India’s insolvency proceedings, tries to understand its origins, asks if there was a better way to handle all this, and then ends.

India’s proceedings to recover bad debt are reshaping Chhattisgarh’s economy – and politics too

A baton is changing hands in Chhattisgarh.

Big companies are entering the state’s steel and power sector, using India’s ongoing insolvency proceedings to buy distressed firms. At the same time, Chhattisgarh’s local steel makers, several of whom entered the power sector in the mid-2000s, are looking beyond these two sectors.

Part Three of our series looks at how NCLT will affect the provincial business classes of India — as the buyers detailed in Part Two come in.

As India tackles its bad loans problem, large local groups and global funds are gaining advantage

By March, seven companies had evinced interest in buying Lanco Infratech.

The company began life in 1986 as a construction contractor, but grew into a power and infrastructure behemoth after liberalisation. Much of this growth was funded by bank loans. In June 2017, after missing its loan repayments, the company found itself on the Reserve Bank of India’s first list of defaulting companies that would have to face insolvency proceedings. At the time, Lanco Infratech owed Rs 45,200 crore to banks and another Rs 5,300 crore to its business partners.

The list of companies that queued up to buy the infrastructure firm was intriguing. There were seven large bidders, four of them from outside India. They operated in disparate fields from international finance and energy to mining and real estate.

Lanco Infratech illustrates a broad pattern that is becoming apparent as India’s National Company Law Tribunal tries to recover bad loans from companies. The tribunal is selling these companies in whole or auctioning off their parts. Alongside, some companies are making their own attempts to reduce debt by selling off some of their units. Through this process, a small group of Indian and foreign companies are taking most of the assets on sale.

Out today, the second part of our series on India’s hugely important insolvency series. This one looks at the folks buying up stranded assets in india.


India’s bid to fix bad loan crisis is reshaping its corporate sector – and creating new challenges

After a long break, I finally — and rather sulkily — resumed work in the middle of August. Out today, the first of my trademark long-winded and tremendously depressing series: on how India’s business insolvency cases are coming along. The series — it is a four-parter — essentially argues that India needs to pay far closer attention to how these insolvency cases are faring, that these are taking the country into uncharted waters. For more, click here.


The MJ Akbar playbook: Men look back at how he preyed on women colleagues in newsrooms and got away

It’s a case that is being described as “India’s Women vs MJ Akbar”. Beginning with veteran journalist Priya Ramani, 16 women have gone public this month with sexual harassment allegations against former Minister of State for External Affairs MJ Akbar. After Akbar filed a criminal defamation case against Ramani, 17 more women who worked in a newspaper he had founded put out a statement accusing the journalist-turned-politician of encouraging a culture of misogyny and harassment. In the outpouring, one set of voices has been largely missing: where are the men?

The stories of Akbar’s predatory behaviour that have now emerged span three decades. They start with The Telegraph, a newspaper he founded in 1982, grow more frequent during his years at The Asian Age, another paper he established, and spill all the way into his last journalistic job at the India Today, which ended in 2014. Over the course of his decades in journalism, Akbar worked with numerous men and women. If everyone knew about his behaviour, how come no one brought it up earlier? And why, even now, does it seem like it is largely the women who are speaking up about what Akbar did?

Reported for this story on MJ Akbar, an editor outed in India’s #MeToo protests, for this report by my fab colleague Rohan Venkataramakrishnan.