Who are these men kidding?

These institutions will NOT sell these shares, they do NOT work under commercial considerations, and they have already turned down many plum deals in the past that they could have grabbed from BAT Plc of the United Kingdom.

Without going into the right or wrong of such a premeditated strategy, and without going into the fact that their hands are in fact tied on the issue, let's face it: what the gentlemen have been going around saying into eager microphones is to be taken with a large pinch of salt everytime they say it. The BAT-ITC affair has been taken out of the hands of institutions, and decision-making on the issue will henceforth be entirely political. The institutions, despite the recent pronouncements of their chairmen, will return to the issue only at the rubber stamp stage.

BAT has unsuccessfully tried for years to grab management control of a company in which it is the single-largest shareholder. The men blocking them have been representing institutions on the ITC board, insisting that a good, professional Indian management needs to be protected. ITC's management has repaid their trust, with a tremendous performance in recent years in the tobacco industry.

In an investment-starved country, why an Indian professional management in an industry that is as low-technology and as retrograde for health as tobacco should receive financial institutional support should not be beyond question. But let us assume for the moment that this is so, that good cigarette-making managers somehow desperately needfinancial institutions' protections against their single-largest shareholder.

However, the same institution men seem to be dithering for months-without-end on providing protection to another set of Indian managements to whom it is NOT politically correct to provide support: the issue here is of the steel loans. Apparently, they do not feel that managements of steel companies, far more vital for the country's industrial future than cigarettes, require or deserve the kind of support that ITC's YC Deveshwar has received without fail. Not even loans that the FIs themselves christen "last-mile" loans, that is, loans that will help complete the last stages of unfinished projects qualify.

Look at UTI. Here is the government going around asking experts' advice on how to restructure the UTI, and Deepak Parekh has provided enough pointers to how this can be done. Yet, before action can be taken on how to remedy the absolute mess that the country's largest fund manager has made of itself, it is going around askingfor positions on board of corporates, threatening to throw out non-performing managements.

What if the equity bias of its main scheme is changed in favour of debt by the restructuring experts? After much sound and fury, UTI would simply move out of the boards where it will disinvest---and this time around, there will be no thought of the protection of Indian managements. That will apply only when special managements with special links---be they in low-tech industries like tobacco---are involved.

The fortunate part of the whole drama of "commercial considerations" that is being played out by institutional top brass is that this is what they themselves really want. The institutions are itching to change: ICICI has shown how much change is possible within the present paradigm itself, how a simple tool like going retail with finance can downplay the political overtone that otherwise comes to mark every decision.

Financial institutions should reinvent themselves as either full-fledged banks or as non-bankingfinance companies, says a Reserve Bank of India discussion paper. Experts are smirking over the fact that a full five years lead time has been given to the huge organisations to do that.

The problem is, in the financial sector, it will not be enough to ask the FIs to reinvent themselves. The environment in which the FIs work, the business-politics links of Indian business, will always ensure that politics, not commercial considerations will decide the run of their business. The institution chairmen may say what they want, but whether a sale is to be made to BAT or not (more likely the latter, really)---will be a political, not a commercial decision.