A court, under the Prevention of Money Laundering Act (PLMA), has declared Vijay Mallya, the industrialist who liked to flaunt the good life in peoples’ faces, a ‘proclaimed offender’. All the protestations by his industrialist friends—that Mr Mallya is being summarily judged in a media trial and is being financially crippled—have been ineffective. There is more than a kernel of truth to these allegations. But, then, Vijay Mallya’s friends forget that he has brought this on himself and his flashy lifestyle was only one of the factors.
His cardinal mistake was in thinking that his money and influence over media, and the position he had bought himself as Member of the Rajya Sabha, gave him immunity from paying statutory dues or ignoring the sad plight of the sacked employees of Kingfisher Airlines. So much so everybody—from bankers to policemen and ticket-checkers—are told to recover money from Mr Mallya first by wrongdoers, before going after the small fry.
The optics of power, money and invincibility, that Mr Mallya had created around himself, are now working against him, when he wants sympathy as just another businessman who made a few wrong decisions. The same is true of Raghuram Rajan, the first-ever Reserve Bank of India (RBI) governor with a rock-star-like status. Rajya Sabha MP, Subramanian Swamy’s campaign to deny him a second term has triggered a frenzied debate and over-the-top claims by the Twitterati, chatterati and even some senior journalists and investors, who ought to know better. The more ignorant ones confidently proclaim that Dr Rajan is the best governor RBI ever had, untroubled by fact or history.
It is not merely about Dr Rajan’s good looks or standing as an economist that gets him media adulation. He happily fanned the media’s quest for quotable quotes (remember the James Bond-like “My name is Raghuram Rajan and I do what I do”) in his many, non-financial public speeches, that too on issues that were beyond his remit as the RBI governor. If one were to go by optics alone—online petition and media polls—then not giving another term to Dr Rajan would be seen as the Modi government shooting itself on the foot. Fortunately, a few voices among senior editors have begun to bring the much-needed sobriety to the discussion by pointing to the limited impact it will have on India, whatever the government decides.
A discussion on Dr Rajan inevitably brings us to the issue of burgeoning bad loans and losses of public sector banks. RBI’s push to force banks to clean up their balance sheets and disclose the true extent of bad loans was welcomed as a positive development. But when one public sector bank (PSB) after another began to declare losses running into several thousand crores of rupees, there was a sense in government and industry that things were going out of control. Banks are reluctant to make fresh loans and have been cutting down on credit limits as well as previously sanctioned loans even after project work has commenced. Industry is quietly lobbying for relief, while bank chiefs are raising the bogey of ill-considered actions by government agencies such as the Central Vigilance Commission, making it difficult for them to lend. In this, they seem to have RBI’s support.
Those of us who have tracked industry for decades know that this is nothing but an attempt to change the media narrative. Yes, bankers are humans and may, sometimes, make a wrong call; but these do not balloon into massive bad debts of over eight lakh crore rupees. It is crony capitalism, the nexus between industry and politicians, who dictate appointments of bank chairman, with a clearly spelt out quid-pro-quo of loan sanctions that leads to massive bad loans.
We have seen plenty of confidential bank documents, over the years, to know how the senior-most bankers have knowingly ignored massive diversion of project funds and have been openly rewarded for their cooperation. Worse, the system is built to give immunity to the chairman and managing director from most of these actions, unless caught red-handed accepting a bribe.
So, when banks start bleating about ‘unnecessary oversight’ by vigilance agencies, it is not going to cut any ice with those who know, or with the public who doesn’t really know. What we need, instead, is a plan to recover money, clean up processes of banks and provide for independent and transparent decision-making with accountability. This is also essential to rebuild confidence in the banking system. Can the government do it?