30th August 2016
A comment received by AV Raju, here. I’ve had to extract it in Word and reformat it, in order to be read it. I am extracting key points below, along with my comments in blue.
This comment by Raju provides a key insight into the role played by public sector banks in the loot of India.
It is reported that the Indian Steel Industry has borrowed to a tune of 4 lac Crores from the Banking System and of this around 75% of it is NPLs. If this is in One sector how about Power, and textiles and infrastructure and real estate?
What is the indebtedness of a common citizen of the country? When would he pay? How did this come about?
Initially there was a factor of irrational exuberance when the lenders were upbeat about the growth of the Steel Industry and that India which is a tiger economy- as opposed to China ( a dragon economy). That the Steel industry is the one that has the potential and visibility to grow manifold considering that the national production is below 80 mn tonnes as against the Chinese production of nearly 700 mn, offering great scope to grow our infrastructure, and consequently our per capita steel consumption, which in 2008 was one of the lowest in the world.
… I am sure the vast majority of the NPLs have been contributed by those Corporates who chose to make their own hay while the sunshine of inaction [during UPA] seemed a very viable alibi. Should not the inaction be brought to justice.
The Bureaucrats have also paid a price and in the broad-brush enquiry many a honest officials and Bank officers are subject to enquiries followed by punitive actions. The Corporates have gone on to grease the new formations and forge alliances with new teams to further their designs to ensure non-payment and to canvass and press for a deep haircut of the existing exposures, citing restructuring of the loans taken by them as the only viable means of coming to terms with the basic economic reality present in the country. Who pays for it?
Consider the case of a small borrower who defaults and goes for a OTS. I have been a banker. In one case the Autorickshaw lent to the borrower under Govt sponsored schemes, originally lent under the pressure of targeted lending, was sold by the borrower within a week of its disbursal and the proceed was used up by him for consumption loan (to perform his sisters marriage).
There was a hue and cry and I roped in the police to have him taught a lesson. But he stood the ground. I felt weak at the protection available to him under the guise of weaker section, humiliated that I am unable to recover public fund entrusted by many pensioners to my care for a nominal interest.
But then, the money, perhaps recapitalised by the Govt later on, has never left the shores. It is the tax payer who has paid for the borrowers sister’s marriage and so be it. It has contributed to economic growth after all.
What about the situation of the national taxpayers wealth being paid to compensate for the wealth that has gone under the carpet never to see the light of the day, converted to assets determined in foreign currencies, never to be used by the nation and ensured to be churning the economy of another nation, even probably an enemy nation. What about the erosion in purchasing power of every individual Indian and the cost being paid by the nation due to depreciation of the rupee. [Sanjeev: this is a very valid point]
It is a huge marriage of illicit interests driven by the sheer ambition of making easy money, with an utter abandon of ethics, principles and patriotism. It is a cumulative effect of all the ambition of all the players in the game of making easy money, with carefully minimised risk of getting legally cornered, while the lenders who are finally to part with the money would be left alone to be tormented by the authorities within and without for not diligently reading the fine prints that purportedly absolve the consultants who are mandated to do an objective job and minimise the risk of failure.
The initial debt and the additional debt later, has been ill-gotten, far in excess of the requirement, for projects that never came up, for capex that never happened and for procuring current assets that better served easy diversion than any addition to enterprise value.
It is a corporate machination of deceit, fraud and treason perpetrated on the common taxpayer with little sense of impunity. This is well achieved by a continual call to litigation by the indebted corporates. The Corporates handed all sorts of stories that blamed the changes in the socio-economy and political scenario … to seek approvals for further leveraging, while promising return of every penny that was ever borrowed.
What is the pain that these economic offenders have caused to the nation? And what is the govt supposed to do in the absence of proper redressal mechanisms and when the Govt is soft pedalling issues, presumably careful not to irritate its own funders and interested parties in the Politics- Industry nexus? [Sanjeev: this is the key point in this article – a very important point]
What is the option left for honest Corporates trying to function in a battered system?… But there is another option, the most regrettable one though. Stop the business, transport the business beyond the boundaries of the country, grow economy somewhere where the competition is more ethical and level, perhaps using the money pumped in by the practitioners of diversion who are now able to dollarize their rupees. [Sanjeev: this is the other side of the story: kicking out honest Indian businesses out of India]
Now the drama unfolds like this.—The Ruling class needs both the corporates, business houses,and business men for financial support largely to fund elections.
The trio of the politician, the business man and the poor-man ganging up to loot the taxpayer.
All taxes are collected and used to run the Govt, enrich the already rich to syphon monies that would never return to the economy, distributed as doles and subsidies but paid mostly by the common middleclass Indian.
This must stop and I believe there is only the SBP, who has the intellectual mettle, experience of having seen it from close quarters, and most importantly the political as declared in the manifesto to bring this menace to a STOP, as of now.