We seem to be witnessing a new kind of ‘Quit India’ movement. The Lalit Modis, Vijay Mallyas and Nirav Modis are quietly leaving the country after defrauding Indian banks of enormous sums of money. In the latest instance, the Punjab National Bank, the second biggest bank in the country after the State Bank of India, has been defrauded of an amount as huge as Rs 11,394 (crore by Nirav Modi and his uncle Mehul Choksi. The scam came to public knowledge only after Nirav Modi had quietly relocated his entire family (including his children who were studying in India) abroad and had surfaced at the World Economic Forum in Davos in the company of Prime Minister Narendra Modi. Once again the self-styled ‘chowkidar’ was found sleeping while the thief ran away with the booty. Worse still, perhaps the chowkidar has also been complicit in ensuring safe passage for the thieves!
The government claims that the fraud had started in 2011 when the UPA was in power. Even if it is true, it hardly absolves the present government of its obvious culpability. Most of the Letters of Undertaking which enabled Nirav Modi to go on borrowing money from foreign banks using the PNB as guarantor were clearly issued in the last couple of years. Initially the government wanted to reduce the whole scam to a local lapse on the part of the PNB blaming a few employees for the fraud. Arun Jaitley has now asked why the auditors could not detect it all this time while his colleagues Piyush Goyal and Nirmala Sitharaman claim credit for the mess ostensibly being ‘cleared’ by the government.
Whatever excuses the government may try to dish out, the responsibility for the PNB scam lies squarely with the government of the day. The responsibility of the government is not limited to its inability to fix the NPA problem of the banks; it lies primarily in its complicity in promoting the menace of crony capitalism which lies at the root of the banking crisis. When one finds Nirav Modi in company with the PM at Davos and watches the PM fondly take the name of ‘Mehul Bhai’ in a gathering at his official residence, it becomes clear wherefrom Nirav Modi gets the audacity to blame the PNB for damaging his ‘brand’ and threatening not to repay his loans for this damage!
The PNB scam is just one more example of the malady that afflicts the banking sector in India today. Even as we were coming to terms with the staggering amount and stunning audacity of the Nirav Modi scam, the news of the Rs 3,695 crore Rotomac loan scam started surfacing in the media. Vikram Kothari, the Kanpur based business baron known for brands like Pan Parag and Rotomac pen, reportedly owes this huge amount to banks like to seven banks. Intriguingly when one of these banks, the Bank of Baroda declared him a managed to challenge it successfully at the Allahabad High Court! The cases like those of Vijay Mallya, Nirav Modi and Vikram Kothari that periodically come to the surface are just tips of the huge iceberg called Non Performing Assets or NPA. Over the years banks in India have been saddled with NPA amounting to Rs 7.34 lakh crore (according to June 2017 figures) and only 12 companies are reported to account for 25% of the total NPAs. With 9.9% NPA, India ranks fifth among the world’s top NPA-affected countries behind Greece (36.37%), Italy (16.35%), Portugal (15.52%) and Ireland (11.85%).
Successive governments have done precious little to address this problem. Raghuram Rajan was the only RBI chief in recent years to have publicly talked about this problem and stressed the need for tighter control. The Modi government has been rather concerned about respecting the privacy of the defaulters and ensuring the defaulters safe passage to foreign sanctuaries to avoid being brought to any kind of justice in India. The banks have been periodically writing off these bad loans, and the government has been busy ‘explaining’ that ‘writing off’ is only an accounting procedure and not actual waiving of the loans! Huge sums of money are being pumped into the banks to keep them going, demonetization forced the Indian people to deposit almost all their money in the banks, banks are penalizing depositors if their deposits drop below a certain level and now the FRDI Bill seeks to authorise banks to turn a part of deposits into bank capital!
The Mallyas and Modis fleeing the country after looting the banks should make us question the lack of effective banking regulation in India and about the business-politcs nexus thriving under crony capitalism that enables such rampant violation and subversion of the laws of the land. But the Modi government and the advocates of privatisation are keen on using this crisis as a handle for privatisation of the banking sector. Government policies have already permitted a significant growth of private and foreign banks while public sector banks are reeling under the mountain of NPAs. Privatisation of banks will mean placing the financial resources of the country and the savings of common citizens completely in private hands, and the history of banking in our country as well as in the contemporary world tells us clearly that private financial institutions are no less vulnerable to crisis and bankruptcy. It is precisely the collapse of the Lehman Brothers, a major private player in global banking and financial services, which had triggered the global financial crisis of 2007. While fixing accountability for the Nirav Modi scam we must resist this disastrous push for privatisation of the banking sector.
From Lalit Modi and Vijay Mallya to Nirav Modi and Mehul Choksi episodes, the Modi government has exposed itself to be as corrupt as any in the past. While it came to power primarily on the anti-corruption plank, once in power it has been presiding over an endless string of scams. And it is trying to run away from any kind of judicial probe and parliamentary accountability on each of these scams. Rather journalists and activists exposing these scams and demanding accountability are being sought to be silenced with defamation suits and worse. If we want to fix the problem of the banks and their NPAs, we must get rid of the regime which itself has become the biggest scam and blot in the history of India’s parliamentary democracy.