Those searching for explanations of the present banking crisis need to remember that some of the economic toxicity generated by the Manmohan Decade owed its origins to the transformation during the A.B. Vajpayee period of the large banks from lenders to large pools of entrepreneurs to creditors of a handful of influential businesses. India’s banking sector is in crisis, in part caused by the high interest rate policies of RBI Governor Raghuram Rajan and its impact on overall growth, but also because since around 2001, an increasing share of the loot illegally made by businesspersons, politicians and officials has been transferred abroad rather than used up at home. What V.S. Naipaul calls “the craze for foreign” reached a high point during the UPA period, when imports were encouraged not just of high technology items but sanitary fittings and even toiletries. Airports in India are a testament to this waste of an opportunity to grow the domestic economy, filled as they are with imports, mainly from Europe, a continent much favoured also by 1998-2004 Principal Secretary to Prime Minister and National Security Adviser Brajesh Mishra (who through his daughter incidentally had almost as many relatives in and from Italy as Sonia Gandhi does, but whose connection with that lovely and timeless country has never been mentioned by those who publicly look askance at the Milan-Maino connection of the Congress Party ruling family). The tsunami of unneeded imports that washed across India in those years were a prime factor in the subsequent economic pain that this country has suffered, especially since Manmohan Singh (this time free of the liberalising influence of Narasimha Rao) indulged in his bureaucratic instincts from 2006 onwards and tightened controls on domestic sectors while loosening them on aliens.
Raghuram Rajan may look the other way, but it may not only be Subrata Roy who should be a guest of the government. Several of the financial conglomerates headquartered in London or New York commit in India the same economic crimes for which they are made to pay billions of dollars as fines in the countries of their origin. Money laundering has become a science in India, and in sheer volume the humble “hawaladar” is being dwarfed by the cleverly masked money laundering taking place through distinguished portals every day in India, with Singapore and Dubai in particular becoming transit points for such cash. During the UPA period, it was a known fact that a small group of officials close to a politician from Tamil Nadu regularly transmitted insider information from within North Block to a group of punters, who then made a killing via a particular exchange. Two years after the change of guard in Delhi, these officials still hop around from one influential perch to the other, along the way snuffing out any effort at uncovering the harm done by their actions in earlier avatars. Insider trading should be treated in India the way it is in the US, as being unacceptable. However, in this country, a few with access to decision-makers become billionaires at the expense of millions who lose their savings as a consequence of rigging of share prices.
Some estimates place the volume of non-performing assets (dodgy loans) in the banking system as close to Rs 550,000 crore. Much of this is owed by a handful of companies, and it is here that attention needs to be paid, not in a populist but in a pragmatic way. Statements such as “every penny will be recovered” belong to the realm of fantasy at a time when global debt recovery agencies are paying only 30 cents to the dollar to buy up Indian corporate debt from lenders, as took place recently in the case of a large entity involved in infrastructure. Should a Vijay Mallya repay 75% of what he owes (including interest and penal interest), he should be given his passport back. Other wilful defaulters paying a similar amount or more on principal and interest should be given the same lenient treatment. Those paying less should face disqualification and blacklisting, while those who repay below 60% and are guilty of wilful i.e. commercially avoidable defaults should go to jail, with this being for an extended period for those paying back 50% or less, all this apart from fines of amounts parallel to those levied in the US or the UK or if they are abroad, a public campaign in those countries to get them back to face justice.
Those who have significant loan volumes outstanding should be dealt with in a pragmatic way, in a context where the populist option of throwing the Indian Penal Code at all comers—with television anchors in full cry—merely leads to Malta or Luxembourg getting new additions to their list of citizens and the taxpayer losing out. Of course, there needs to be accountability for the past. Such as, who recommended the large loans that went bad? Were they bank managers or even bank directors? If there is any evidence of a quid pro quo for such telephone calls and recommendatory letters, those guilty need to be given both prison terms as well as cash fines.
Finally, in an age where technology has raced forward, it would be a simple matter to ensure that the office cabins of each public official dealing with money (such as in the banks or in commerce-related departments) be monitored, and the feed go to a central point where any suspicious exchange can be identified for investigation. Indeed, the sooner not just sensitive offices being monitored by designated points but all commissions of enquiry and all courtrooms be live streamed, the better. Transparency is core to a clean system, and it is to be hoped that Prime Minister Narendra Modi and Chief Justice T.S. Thakur will separately address this need in the months ahead. The people are angry and are close to the boiling point.
They seek the results only pragmatism on the Gujarat model and courage on the scale so often shown by the Supreme Court of India can ensure.