Monday January 20, 2020
Home Business India Grapple...

India Grapples with Credit Issues

While the framework utilised by the rating agencies that has led to a delay in ratings relaying the correct credit information to market participants

0
//
India, Credit, Issues
Recent news whereby credit downgrades have just preceded defaults by Non-Banking Financial Companies (NBFCs) is a case in point. Pixabay

As India grapples with credit issues, one of the primary factors that needs analysis is the broken transmission mechanism that relays credit quality to market participants. In common parlance, the transmission mechanism that provides information regarding the credit quality of the borrower to the lenders is unable to do so efficiently. Recent news whereby credit downgrades have just preceded defaults by Non-Banking Financial Companies (NBFCs) is a case in point.

While the framework utilised by the rating agencies that has led to a delay in ratings relaying the correct credit information to market participants is partially to blame for the inefficacious credit transmission mechanism, issues around rating agencies are only part of the problem. For sure, rating agency regulations must be improved, but we must also realise that “credit market frameworks” are much more than ratings.

We must realise that credit ratings have limitations in terms of predicting credit cycle ups and downs. This phenomenon isn’t limited to just India but is a global feature. The inability of the credit rating mechanism to adequately price in and predict the credit cycle implies that a multi-pronged approach is needed to ensure that the credit quality transmission mechanism works effectively. Essentially, India needs to develop other features of the credit market that will assist market participants in gauging credit quality, thereby reducing the risk of a “jump-to-default” scenario we have witnessed repeatedly over the last 12 months.

Indian policymakers need to start working on a framework that will allow a liquid and deep secondary market to develop in credit products. Credit products here refers to the entire universe of lending, including bonds, loans and other instruments. Market pricing of products and risk and therefore increased participation by investors will help in “price discovery” of the credit quality. Constant pricing of credit risk and the concomitant information and structure that entails will imply that lenders will have a better information set with which to make informed credit decisions.

India, Credit, Issues
As India grapples with credit issues, one of the primary factors that needs analysis is the broken transmission mechanism that relays credit quality to market participants. In common parlance, the transmission mechanism that provides information regarding the credit quality of the borrower. Pixabay

A market that allows for secondary liquidity, albeit even small amounts to start with, will also incentivise borrowers to manage their credit profile better. More importantly, a secondary market for credit instruments will go a long way towards avoiding the bunching of credit as it happens in today’s market. A credit market has a cycle, and without the existence of a robust secondary market, in expansionary credit cycles, poor quality credit gets excessive access to capital. On the contrary, once the credit cycle contracts credit access for all businesses is diminished to a great extent.

We must work towards breaking the above trend that has plagued the Indian economy significantly. A secondary market for credit instruments will incentivise both lenders and borrowers to behave in a way such that the entire available pool of credit goes towards the most optimal usage.

Policymakers also need to start utilising vehicles similar to Real Estate Investment Trusts (REITs) or Infrastructure Investment Trusts (InvITs) to allow for the pooling of credit instruments. While debt mutual funds exist in the market, the aim of the new “credit pooling vehicles” will be to enable institutional investors to access credit instruments across the spectrum, and not just limited to certain corporate bonds. Access to vehicles that allow for greater liquidity and transparency will go a long way in increasing the capital availability and investor participation in Indian credit markets.

As India looks to boost economic growth, it is essential to realise the credit interlinkages in the economy. To boost exports, a primary aim in India, credit access will be a vital component, if not the most important. If credit is constrained by inefficiencies in the credit information transmission mechanism and therefore leads to inefficient lending in the real estate sector, then it is essential to realise that not only is the real estate sector severely affected but so are other areas such as exports. Primarily, an improved credit framework will lead to both higher availability of capital and credit availability at more affordable rates.

Also Read- Swedish Teen Climate Activist Urging Law Makers to “Listen to the Science” and Take Action

Credit markets, like all businesses, will move in cycles. Indian policymakers must aim to start building on the blocks that will allow credit downturns to be less severe and shorter. The ability to provide the market access to better information and investment structures will go a long way in improving credit pricing, and thereby credit access. (IANS)

Next Story

Tech Giant Apple Empowering Students in Burhanpur Pen Success on iPads

Apple Teacher is a free online professional learning programme designed to support and celebrate the great work of teachers around the world

0
Apple, Campus, China
A customer is entering the Apple store in Fairfax, Virginia. VOA

BY NISHANT ARORA 

Frequented by historians and art lovers seeking solace in its rich past, another transformation, albeit quietly, is taking place in the city of Burhanpur and this time, Cupertino-based tech giant Apple is empowering talented kids at the Macro Vision Academy (MVA) to find their place in the fast-changing world.

One of the handful schools in India that has employed iPads and Mac desktops for imparting education, the CBSE-affiliated, day-cum-residential school has customised Apple products to improve students’ results and rankings – thus earning the tag of ‘Apple Distinguished School’ (ADS) for the second time in a row.

Worldwide, there are 470 ADSs in 34 countries and four are in India. Apple Distinguished Schools share their achievements by collaborating with Apple teams to host on-site Apple Distinguished Educators (ADEs) visits. The educators showcase best practices for using iPad, Mac, apps, multi-touch books and other digital materials to create powerful learning experiences.

At the Academy which is touted as the complete Gurukul, students are creating world-class apps while teachers are busy imparting lessons via Apple TVs in classrooms as students deploy iPads at the same time to imbibe real-time learning, including music on iPad.

The benefits of learning on iPads – nearly all students at the Academy are equipped with iPads and the Academy has over 150 top-of-the-line iMacs at its fully-equipped iMac Lab — are numerous: Learn and revise on the go, lesser books to carry, analytical performance reports to improve and track the growth, digitised voice notes at a secured Wi-Fi campus, and much more.

Today, the MVA students are working at Goldman Sachs, Deloitte, Uber, IBM, Bank of America, Morgan Stanley, Infosys, Microsoft, Adobe, and several other top-notch firms. They have got admissions to prestigious universities like Penn State University, The State University of New York and all IITs.

Apple iPad in frame
Apple iPad. Wikimedia Commons

According to Anand Prakash Chouksey, Director, MVA, iPads and iMacs are part of students’ everyday life at Macrovision.

“The devices help teachers connect with students in a seamless way. The digital approach has increased kids’ interest in studies and their confidence levels have gone up too. They think in a more creative manner while looking at the same old curriculum. This has increased parents’ confidence too,” Chouksey told IANS during the campus visit.

Apple School Manager at the premises is a simple, web-based portal for IT administrators to manage people, devices, and content all from one place. There is a redesigned user interface, more powerful ways to manage bulk activities, and greater control over accounts and classes.

“With the help of Apple School Manager, installing, maintaining and integration of 2,500 iPads was simple and did not incur any extra cost. It also gave us the flexibility to customize and implement policies as per our school needs,” informed Vijay Sukhwani who takes care of the entire Apple ecosystem at the campus.

Apple Classroom app turns iPads and Macs into powerful teaching assistants. The app also makes it easy to share information and send and receive files with the entire class and individual students using AirDrop, or show student work on the big screen.

All Apple products are built with an integrated approach to privacy and security and providing schools with devices, apps, and services that keep students’ work and personal information secure.

With Managed Apple IDs, the school controls student information and can choose to enable or disable apps and services such as iMessage, FaceTime or student progress reporting with the Schoolwork app.

Apple iPad
At the Academy which is touted as the complete Gurukul, students are creating world-class apps while teachers are busy imparting lessons via Apple TVs in classrooms as students deploy iPads at the same time to imbibe real-time learning, including music on iPad. IANS

Jay Firke from the school who attended Apple’s annual flagship Worldwide Developers Conference (WWDC) in San Jose, California, last year is super excited.

“I have created an e-portfolio app wherein class teachers can fill the students’ report about their skills and educational topics. The app currently works on school Wi-Fi,” Firke told IANS.

“I have also worked on an iOS school app which is made with Swift 4.1. This app includes all our school details,” he added, as his team members showcased some of the apps they have built in the classroom.

Apple has also developed apps that help teachers at the Academy put the power of technology to work, bringing ideas into their lessons and productivity to their classrooms.

Also Read: #WhatsAppDown Trends on Twitter As Messaging App WhatsApp Faces Outrage in India

The ‘Schoolwork’ app makes it easy for teachers to share class materials, assign activities within apps and view students progress. Students have one place to see assignments, submit work and view their own progress.

Apple Teacher is a free online professional learning programme designed to support and celebrate the great work of teachers around the world.

“We are aiming for an all-round development of not only students but also teachers as true digital learning can only happen then”, said a beaming Chouksey. (IANS)