Wednesday, August 19, 2009


So this post has nothing to do with Aamir Khan, his movie and bollywood. In fact this post Quarter se Quarter tak (QSQT) is more to do with the fairly lousy world of commercial banking and I have been extremely unoriginal by having picked up the phrase from a colleague at work.

This is the way I believe most companies operate atleast in India and surprisingly so do banks that lend credit to them. Every quarter ending with a green along the year in green is enough for a company to drive a hard bargain for interest rates. Needless to say the stronger player in any game has a higher bargaining power! So everything around credit arrangements is confined to profit maximisation.

This reminds me of my first strategy class where I learnt the difference between profit and wealth maximization and how firms should try to work towards maximizing wealth. But the classic principal agent problem twists the situation. The CFO of a company is still an agent and unlike the principal looks at everything in the company from a short term perspective. So does the bank (very conveniently) when it lends. So at the end of the day of relationship management is neither about relationships nor about fundamentals. It is as my boss fondly says about opportunism (I love the sound to this word!) As I try to grope around in this murky world of lending at least I have figured out that no one cares what happens to the company down 3 years, the CFO met his target for the year and so did I!!!

PS: I am writing this post after a long discussion with my boss regarding how corporate banking differs in India from that in Germany. More on this topic to follow in the next post..

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