With financial scams of humongous proportions being reported in the media every other day, bankers and financial experts are a much harried lot. They are not only under the scanner of the regulators but are also much sought after by a section of the society. “These days professionals are very much in demand, more so after the sensational enrichment exposure of Nirav and Choksi,” my colleague remarked animatedly.
“What makes you say so?” I queried for there were no two opinions that these professionals always had a role to play in financial and governance matters. Probably my friend had the latest developments in financial reporting in mind. These days focus has shifted remarkably from plain financial reporting to accounting with responsibility to the stakeholders. And my colleague was not only a banker by profession but also a qualified financial accountant.
“Earlier big borrowers would approach us for facilitating getting credit facilities from banks, for minimising their tax liability to the maximum limit or for defending and protecting their interests in case they defaulted in repayment of credit facilities availed, for they felt the process of sanction was long drawn and documentation cumbersome. Today, their focus has changed.
They prefer to go for non-fund based facilities like guarantees and letters of credit for which bankers are more amenable as there is no immediate outflow of funds and income is received up front by the bank as margin for the facility.” “So what is the problem, if clients can establish their credentials and back it up with relevant papers?”
“No issue. But the requests some high profile people make defies description. After hearing them, at times, one tends to feel whether our professional knowledge needs upgrading.” “What do you mean?”
My colleague narrated his experience where a businessman approached him for a bank guarantee stating he wanted to avail a ‘LoU’ and he was briefed in detail the requirements and procedure for obtaining a ‘Letter of Undertaking’. The prospective borrower in all humility retorted, “There are no such rigours involved. There is ease of doing business in the real sense. Payment of commission is deferred or waived, facility gets automatically rolled over periodically even after crystallisation of liability. I think they call it ‘Letter of Understanding’,” leaving my colleague stumped for an answer.
M S Vaidyanathan
Email: maharajapuram.s.vaidyanathan@gmail.com