By Vijay Darda | 25-06-2018
Ruthless with small borrowers and complicity with big defaulters is an open secret now; the entire banking system is at stake!
Three news reports which have come within a week are extremely worrying. The first news was that the government has written off bad loans worth Rs. 1,44,000 crore. Generally it is called a bad account. The bank in its terminology calls it NPA or non-performing asset. This means that this loan will not be recovered. The second report was about the arrest of Bank of Maharashtra CMD Ravindra Marathe, executive director Rajendra Gupta, former chief managing director Sushil Munot and several other senior officials for fraudulently lending Rs. 3,000 crore to the real estate developer D S Kulkarni and his wife Hemanti. It was revealed during the investigations that the bank officials misused their powers and illegally sanctioned the loan.
The third report which came in was that a total of 54 employees and officers of the Punjab National Bank (PNB) were involved in the Rs. 13,000 crore scam in the bank. These included those ranging from bank clerks to foreign exchange branch officers and bank auditors to senior officials of the regional branches. In the PNB’s internal report, it has been revealed that the top brass of the bank was aware that a large amount of credit was being given by the PNB’s Mumbai Brady House branch for the last few years, but none tried to know the reason behind it.
These three news reports make it amply clear that the country’s banking system is not functioning properly. Somewhere in the system there is a big mess-up. Just look at these figures which state that in the last 10 years, public sector banks earned profit of collectively Rs. 9.20 lakh crore and converted Rs. 6.57 lakh crore as bad loans. This is the amount which the banks lent to Vijay Mallya, Nirav Modi, Mehul Choksi and others like them and which could not be recovered! Obviously, the banks will compensate this amount from their profits! This means the actual profit of Rs. 9.20 lakh crore was reduced to Rs. 2.63 lakh crore.
The issue is not confined only to defaulters like Nirav Modi, Mallya or Choksi. You might remember that the names of 12 big defaulters including Bhushan Steel, Bhushan Power and Steel, Lanco Infra, Essar Steel, Alok Industries, Amtek Auto, Monnet Ispat, Electrosteel Steels, Ira Infra, JP Infratech, ABG Shipyard and Jyoti Structure, which swallowed loans worth Rs. 2.54 lakh crore, were made public. Apart from this, another list was made public and it included Asian Colour Coated Ispat, East Coast Energy, Winsome Diamonds, Rei Agro, Mahua Media, Jayaswal’s Neco, Videocon, Ruchi Soya, Essar Projects, Jai Balaji Industries, Transstroy India, Zoom Developers, S Kumar, Surya Vinayak, Indian Technomac, Raja Textiles and countless other names.
The list is too long. The question is why did the government not take any stringent action against them? Another question is whether those who are named in any financial scam or those who are caught, are the only culprits? Are they being used as an escape route? Are the decision makers under whose pressure the chairman or other top officials of the bank get involved in deceitful transactions, being caught? This question has always been uppermost in my mind, irrespective of which government is in power.
I raised this question constantly in Parliament if those who had defaulted after being given loans earlier, were again given loans in different names? As a member of the Standing Committee on Finance, I wrote letters to all the major banks in India but did not get any reply from any of them. I sent several reminders too but the banks did not respond. After that I also told the finance minister, raised the question again in Parliament, but no one paid attention to it. The question continued to haunt me as to why did they adopt such an approach? Another question which keeps striking my mind is that why such a competent governor like Raghuram Rajan was not continued? Actually, he was trying to find the rot in the system.
Demonetisation too created a lot of uproar. The purpose of demonetisation was to drive the black money out of the financial system. Statistics of the Reserve Bank of India reveal that more currency has returned to the system than was driven out of it. And as far as the claim of leading India towards cashless economy is concerned, it is an eyewash. I am in Sweden now and I see that no one right from the hotel to the restaurant accepts cash here. This is cashless economy! In our country, everything is done keeping an eye on the political system, election that is. Do you know how much an election costs to a candidate. Election at an expense of Rs. 10 lakh or Rs. 20 lakh is a delusion. Actually, crores of rupees are required to contest an election. Where will the money come from to contest election if the economy becomes cashless? That is why the loopholes are not being plugged.
To all intents and purposes, there are committees for action but everybody knows how these committees are working. I have a friend who is well-versed with the banking system. He says if he is included in the committee, half the members would either resign or leave or would be sacked. In fact, scams have become order of the day. Corruption has begun to devour our banking system. Therefore, it is necessary to break this nexus.
There is a need to make the process of writing off bad loans even more stringent. Unfortunately, this is not happening. The amount of bad loans written off by the NDA government is much more than what the UPA government had done. One more significant thing is that unless the responsibility for bad loans is fixed and the provision for strict punishment is made, it will not be possible to break the nexus. The country will be ruined economically.
Before I conclude…
The presence of Islamic State in Jammu and Kashmir is a matter of grave concern for the whole country. The flag of Islamic State was for long seen in the Kashmir Valley. But the killing of four terrorists of the Islamic State of Jammu and Kashmir in an encounter with the security forces, has established the existence of this dreaded terrorist organisation in the valley. The Islamic State has a history that it has destroyed the region where it has gone. We will not only have to be alert but also take so stern an action that it does not succeed in increasing its influence and gaining ground in the valley.
Why are the banks, which cross all the limits of decency to recover debt from small borrowers, so lenient towards big borrowers? Are the big defaulters swindling huge amounts the only culprits? Or are they being used just as an escape route? Why does the government not take action against the decision makers under whose pressure chairmen of the banks get into nexus with the culprits? There is definitely something fishy.