By Nalini R Mohanty
Arundhati Bhattacharya, chairman of the State Bank of India, wrote in The Economic Times in her reaction to finance minister Arun Jaitley's Budget speech last Monday: “Even though the budget has not laid down a roadmap for bank recapitalisation (unchanged at Rs 25,000 crore for this fiscal), we hope this is an ongoing exercise as at the current rate, this will be inadequate.”
Look, the head of the largest public sector bank of India has the gall to complain about the ‘inadequate’ support from the tax-payer to compensate for the losses banks had to suffer due to sheer corruption or downright incompetence of the top bankers like her!
The finance minister had provided for Rs 25,000 crore of the tax-payer’s money in this year for recapitalisation of the public sector banks (PSBs); he has again shelled out Rs 25,000 crore in the current budget. He has promised to give Rs 10,000 crore in 2017-18 and another Rs 10,000 crore in 2018-19 as part of the Indradhnush scheme unveiled earlier this year. But the banker thinks the sum allocated is ‘inadequate’.
She wants much more money every year and she wants this outgo to be an ‘ongoing exercise’ so that bankers like her continue to lose money to fraudsters and not lose sleep, as poor taxpayer is there to pick up the tab and to pay for their (both lender’s and borrower’s) lavish lifestyle!
Look at the staggering statistics: gross non-performing assets (NPAs), by the government’s own admission, amount to more than Rs 4 lakh crore (which is lost and unrecoverable). That is not all. PSBs have also Rs 2.70 lakh crore in what they call ‘re-structured loan dues’ (most of which is as good as lost).
But this is just the tip of the iceberg. As the banks are forced to abandon the hitherto deceptive accounting practices that treated impaired mortgages – in which borrowers had defaulted on payment for a long time – as if they would eventually be repaid, the size of the NPAs will be much larger than what is currently made out to be. That is why the panic of the likes of Bhattacharyas – they want public money to cover their tracks so that they continue to do merry-making.
The taxpayers have had a double whammy to keep these bankers afloat– first they lose thousands of crores of rupees in shady deals these bankers transact with unscrupulous businessmen and then they are asked to shell out thousands of crores of rupees so that the banks continued to engage in predatory lending.
Why should the taxpayer hold a lifeline to them and assume the losses? Why shouln’t these bankers and the wilful defaulters be made to pay the price for their complicity in defrauding the public exchequer?
And it is complicity, for sure. Contrast the case: when it comes to a retail customer, an average individual, these bankers do so much due diligence before advancing a home, car or personal loan. One’s assets and repaying capacity become the golden rule for determining the amount of loan – a few lakh rupees, or even a few crores.
But when it comes to granting a loan of hundreds, and even thousands, of crores, rulebooks are thrown to the wind; these ‘smart’ bankers are even duped by ‘round-tripping’ resorted to by ‘smart’ customers (they take loan from several banks by pledging the same collateral).
When it is a case of a small customer, original documents of the property is retained by banks as collateral; but when it comes to the big fish, the proof of ownership of property is enough for granting big loans.
And, pray, how does one get a loan of Rs 1,000 crore on the basis of a property worth 1 crore. Bankerss say they want to unravel the animal spirit, the spirit of entrepreneurship, ingrained in investors and promoters, by taking risks. When the entrepreneur fails to make the project work, the crores disbursed to him become non-performing asset.
Why should the banker be held accountable for the money advanced and lost? S\he did it, in the first instance, in the larger interest of the nation, to create more industry and more jobs.
Let us accept this argument at its face value. By this logic, the borrowers should be held accountable. If they are wilful defaulters, legal recourse should be taken to attach their property and recover the amount.
But, then, the bankers say that there are two issues in this regard. First, legal remedy is time-consuming. Judicial officers do not hear the cases for months. Then they keep giving adjournments leading to pile-up of cases.
Second, even if legal remedy materialises and the defaulter’s collateral is seized, very little of value can be recovered from it.
If that is the case, at least the bankers can resort to naming and shaming the wilful defaulters. Bhattacharya says that it is a ‘fiduciary relationship’ between the banker and the client and the names cannot be disclosed.
But, again, look at the double-standard: Bhattacharya’s SBI had no qualms in publishing the names and photographs of small defaulters -- who owed the bank as little as Rs 20,000 -- in national dailies and further threatening that if they did not pay up within a stipulated time, the names and photographs of their guaranteers would also be published.
But when it comes to naming criminals who have defalcated Rs 20,000 crore of public money each, Bhattacharya invokes ‘fiduciary relationship’ and insists on keeping their names confidential.
The reason is crystal clear: all such big deals are the consequences of powerful connections and humongous underhand exchange of money. If the parties are named, the secrets will tumble out of the cupboard and many of these top bankers, along with the big defaulters, will spend time in jail for fraud.
These bankers and the wilful defaulters deserve no mercy from the taxpayer. The only way they can be deprived of their incentive to loot public money is by first sending them to jail. The bank recapitalisation can happen later.