Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Clean Up Time? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • May 5, 2001

    Clean Up Time?

    On a flight from Europe to USA, I noted that the Financial Times (Friday, May 04, 2001) carried a news item that “Mr. Yashwant Sinha, India’s Finance Minister yesterday appealed for a clean-up of the financial sector to help salvage a stalled reform programme”. The FT went on to quote Mr. Sinha, “If high ethical standards are not kept, then we might as well write off economic reforms” and also, “Unless and until we are able to tap small investors, we will never be able to attain our growth targets”.

    Great words indeed and a sort of echo of what Mr. Manmohan Singh, the Finance Minister under Prime Minister Rao and the presenter of the July, 1991 reforms budget said, “Investment is an act of faith”.

    You can have the most inexpensive and attractive stock market in the world and the most brilliant product or market position as a company, but if an investor has to count his fingers every time he shakes hands with someone, how can there be any desire to invest in such a market?

    If Mr. Sinha is serious, he will take the following steps:

    • Cut the phone lines between New Delhi and the Indian financial institutions like UTI, LIC, ICICI, and State Bank of India – this way there is little temptation for the well connected to use their connections to get their little blessings for small favours and pending applications,

    • Make sure that government nominees occupy less than 33% of all board seats of these financial institutions, the public has 33%, and entrepreneurs with businesses less than Rs 1 bn in revenue have 33% of the seats and loans and approvals sanctioned above, say, Rs 100 m are published every quarter,

    • Nominate people to run these institutions not based on their political backing nor on their number of years in service but, rather, based on their ability to transform many of these misguided gems into fulfilling the charters set for them when they were created,

    • Force more disclosures on these institutions so that their actions are transparent and open to public (and I mean “public”, not some committee) scrutiny,

    • Create a permanent court to handle economic offences greater than, say, Rs 100 crores (if you catch the big crooks, the small crooks will either stay small or disappear totally),

    • Ensure that SEBI pushes through a simple and straightforward (not complex and open to judicial debate) disclosure law that is adopted by every person working as an employee in any financial institution or company in the country (Mr. Sinha, please see what we have adopted internally)

    • Ban all road shows by his team to London and New York (ahh, summer is here in India, time to go abroad again) and instead send his team to the hotter climates of Ludhiana and Nasik instead to apologise to the small investors for slippages of the past. Before India needs to be “sold” to the foreign investors, it needs to be sold to the Indian investors.

    Some of the ideas above are pretty easy. How long does it take to call MTNL and cut the phone lines? Five minutes? Or to announce a change in the boards of the financial institutions? One week? The permanent courts for economic offences may take longer but, on the whole, everything above could be implemented within 3 months. They may not solve 100% of India’s present ethical problems but, if implemented, will take care of 90%.

    None of the ideas I have expressed above are new and they have been offered before in previous articles as the first step towards a long and drawn battle to let money flow freely where it deserves to rather than flowing along with the connections one has.

    My ideas may be old, but then neither are Mr. Sinha’s pronouncements new. Other Finance Ministers have said similar things. But the practices of the past go on.

    India has the potential to deliver and the Indian financial markets have come a long way from the closed days prior to July 1991. Hopefully, Mr. Sinha’s frustration with the way the equity markets have tumbled and threatened the 9 on 10 ratings he received for his recent budget and the silence that he and others in the country maintained when the markets were zooming skywards (did anyone care to ask where people got the money to buy those TMT stocks when the market was going up???), will make him a determined reformer.

    I hope so. And I wish so.



    Equitymaster requests your view! Post a comment on "Clean Up Time?". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms