Not too long ago, the year 2008 went down in the history as year of sub-prime crisis. Just as the Spectrum Scam intensified with the stepping down of A. Raja, Goldman Sachs Sr. Banking Analyst and Director Tabassum Inamdar pushed the report on the concerns about Banks financing to Indian Telecommunications companies involved in the spectrum scam. [2 or 3 Quarters Ago, Mr. Aga, CEO of Idea Cellular had called these bankers, Daredevils, who would choke the supply anytime]
The Honorable Justice at Supreme Court ordered to look into the issues of funding for new 2G Licensees. Now according to the rules of the game, shrewd bankers have extended financing in every possible way to protect their capital. However, if their licenses were to be canceled on the recommendations of TRAI for failing to rollout services, the precious 2G Spectrum will go to the Banker /FI as it has been hypothecated to them 🙂
Systemic Risk ? – Well not yet because the amount under question is pretty small compared to the size of the banks but yes definitely a drain on the balance sheet of the Banker. According to various analysts the net amount under risk is about Rs 40 Bn by means of financing to License [where they got Startup spectrum for FREE]
Everybody is a stake holder in this Scam so the outcome is likely to be a negotiated one but clear rules of the game will emerge where Government will be the beneficiary.