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Will complete transparency about the creditworthiness of businesses be harmful in any way?

Created by : Sudeep Tarafdar, Senior Consultant, IBM  | 08 09 2010 07:55:38 +0000
Industry : Asset ManagementFunctional Area : India(Markets)
Keywords : creditworthiness financials of a company company creditworthiness credit issue of a business businessses
Activity:  177 views;  last activity : 08 30 2010 14:31:51 +0000

Recently finance minister Pranab Mukherjee rejected the demand of some MPs to disclose the names of companies that have defaulted in repaying loans to public sector banks. But, the minister gave a number of reasons why such a measure should not be taken. He said there were confidentiality clauses in the loan agreement that prevented the names from being made public.


http://cpasuccess.typepad.com/photos/uncategorized/2008/10/21/transparent.jpg

If this disclosing names is done, a person will be declared insolvent even before the court declares the defaulters as insolvent. With that he said complete transparency will be not good as people's money which has been invested will be at stake. What do you think people, will complete transparency about the creditworthiness of businesses be harmful in any way??

  
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No, I don't think so, legal issues aside, it’s hard to see how more transparency in this matter could hurt in any way. What exactly is the logic here? Infact in many countries of the world, credit reports of all businesses and individuals  not just publicly listed ones are available for a price to practically anyone who needs them. In India, too, banks have been clamouring for an effective credit reporting bureau for individuals for a long time.

Why shouldn’t similar information about businesses be available to anyone who needs to deal with it, whether as a supplier or a customer or an investor.  One of the reasons why short-term investment dominates in India is that a lot of high-quality information is not available. The politics of revealing defaulter's names in Parliament is a separate issue, but more transparency about the creditworthiness of businesses couldn’t be harmful in any way.
By Sudeep Tarafdar, Senior Consultant, IBM  08 09 2010 07:59:10 +0000
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Difficult one to answer but in some cases a complete transparency might be harmful for the reasons mentioned. But then transparency should be provided at least to the judiciary or the investigative body so that they can go deep into the matter.

And if there is a case where making it public would help or stop more people from falling prey, then why not ? Atleast it will ensure our MP's and MLA's dont hide behind the cloak of legality when they are involved in a fraudulent transaction
By Jaygopal Raghavan, Marketing Manager, Landmark Group  | 08 30 2010 14:31:47 +0000
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COMPLETE TRANSPARENCY WILL AGGRAVATE THE  WOES OF THE COMPANY CONCERNED.RUMOUR MONGERS AND PEOPLE WITH VESTED INTEREST MAY CAUSE MORE, HARM TO THE COMPANY AND THE COMPANY LOSES A FAIR CHANCE TO REVIVE.ULTIMATELY IT WILL BE THE POOR SMALL TIME INVESTOR WHO WILL LOSE HIS INVESTMENT IN SHARES. 


By s.baalu , Consultant, XYZ LTD  | 08 14 2010 12:46:17 +0000
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There is no use of sharing such information to everyone, this should be confidential.
By Mehebub Ahmed, Senior Analyst, UnitedHealth Group  | 08 10 2010 08:02:34 +0000
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Yes it will b harmful.....you cannot pass on the entire details to everyone or anyone coz thn there can be misuse of data. Also, in a competitive corporate world, it is always good to play your cards right and save the trump card to have an edge over your competitors
By Shraddha Parab, Placement Officer, Shri Vile Parle Kelavani Mandal (Management Office)  | 08 10 2010 05:36:53 +0000
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Of course it can be harmful. Not everybody has the knowledge or insight to look beyond the simple statement and while it can prevent unwise investments, it can also cause the business to take a turn for the worst and thereby losing all credibility.

Consider the fact that in the UK, there is a bank that is spliced in two. One part is considered unhealthy while it has money to spare. The other is struggling but is considered to be healthy. 

Which one would you put your money in?
By Dennis Aries, Owner, Arkro IT  | 08 09 2010 08:15:56 +0000
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If complete transparency about company is not available, then it is harmful to us who give them a huge loan or deposit. This statement seems absurd. If a business runs only on private funds then there is no need to be transparent. But if business runs on public funds, then there should be complete transparency about credithworhtiness of the company. This type of questions do not arise when company uses public funds.
By Arun Kumar K, Security/ Equity Research Analyst, Thomson Reuters  | 08 10 2010 05:44:55 +0000
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I am in total agreement with Sudip on this. When ever question of money comes which belongs to somebody eles there should be complete tranperancy be it for Companies or individuals or be it anybody.

Even the companies knows the legal system of our country and take advantage of the same. Accordin to me it should be stopped immidietly.
By Rathin Deb, Freelance Retail Consultant  | 08 09 2010 10:47:48 +0000
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