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When FIFA, international body that sets rules for football, introduced Video Assistant Referee in 2018 World Cup, reaction of fans was not uniform: Some saw innovation as an opportunity to reduce umpiring errors, others bemoaned charm of a fascinating sport being lost to technology.
Still, change did not drive fans away.
Some domestic leagues, such as Italy’s Serie – A, have adopted technology, while more prominent English Premier League continues to resist it, reflecting inherent human inertia against change.
What did VAR achieve Transparency and better decision making.
The reaction of fans depended on whether review benefited their favourite team or went against them.
A penalty decision led to joy for team that got it and depression for opponent.
But few questioned decision.
Banking is similar to football – in more ways than one.
It needs rules that are transparent and steady over a period of time to earn broader trust, which leads to agony and ecstasy depending on which side of field one is.
What if FIFA were to discontinue VAR in second half of a match after Brazil conceded a goal to England through a penalty in first half
Banks want RBI to withdraw VAR in middle of game.
As Rs 90,000-crore default of Infrastructure Leasing Financial Services grinds through government-appointed administrator, banks want to pretend that they would receive all money back.
But, will they
The RBI is still debating whether to exempt banks from providing for potential losses in loans to IL FS.
What is status
Loans at parent holding company amount to Rs15,900 crore.
Almost all of this has been invested either as equity in operating companies or given as loans.
If one goes by basic principle of bankruptcy, it would be a miracle if lenders recover even a dime.
The infrastructure business owes Rs 58,500 crore.
Potential buyers would ask lenders to take a haircut because at these debt levels, most of these businesses are unviable anyway.
UBS analysts project various scenarios and estimate that lenders may have to take haircuts ranging from Rs 11,300 crore to Rs 28,500 crore.
Can elephant in corner of room be hidden
What if RBI permits banks not to provide for exposure to ILFS Yes, reported profits would be higher, but lenders would be on a wing and a prayer.
Also, does an RBI exemption alter picture anyway Not really.
It would give some bankers a false sense of being sound.
Unfortunately, world does not depend on reported numbers anymore.
IndusInd Bank, with an exposure of Rs 3,000 crore to ILFS entities, has already provided Rs 530 crore.
Its CEO, Romesh Sobti, said it would provide more than what regulation stipulates.
When investing community knows that these loans are worth two-third or even lesser, it would build that into valuation of bank.
It wasn’t long ago that investors began valuing state-run banks at deep discount to their book values unlike their private peers, which commanded a premium.
It is not that investors were prejudiced, but numbers hid more than they revealed.
If an exemption does not achieve anything material other than kicking can down road, should regulator pamper banks If it does, instead of strengthening banks, Mint Road could end up eroding its regulatory reputation.
