Snatches of recent economic history
DN Ghosh’s memoirs begin with the dramatic late-night call from PN Haksar, principal secretary to prime minister Indira Gandhi, which enveloped him into the top secret manoeuvring and high drama that culminated in the nationalisation of 14 public sector banks in 1969—an event that dramatically changed the face of Indian banking forever. It was pure chance that Mr Ghosh, then just a deputy secretary in the banking division of the finance ministry, was drawn into the hush-hush discussions that excluded even the union finance secretary and the then Reserve Bank of India (RBI) governor, LK Jha.
Mr Ghosh provides a vivid and delightfully detailed account of those three eventful days leading up to Indira Gandhi’s broadcast to the nation announcing bank nationalisation. It is a fascinating piece of historical documentation which, as he points out, differs from the official history of RBI (third volume). The next seven chapters take us through the high drama of the legal battle that pitted the legendary Nani Palkhivala for the private banks and attorney general Niren De for the government and, finally, the passing of the legislation itself.
Social control over banks by the government, the theme of the 1960s, has had a chequered history and Mr Ghosh had a ringside view of the setting up of the banking division in the finance ministry and the ugly interference in the working of nationalised banks by politicians and bureaucrats in the decades since. Having read and researched the other side of this battle, in the writings of AD Shroff and Minoo Masani, who bitterly opposed the nationalisation of banks and insurance, I would have liked to hear Mr Ghosh’s views about how bank nationalisation turned out, or the role of the banking division, as it evolved over the next few decades. But, I guess, the title of his memoir, No Regrets, says it all.
For those interested in India’s economic and financial history, the book is strewn with interesting little nuggets, such as the role and contribution of DR Gadgil in the evolution of banking policy; the brazen confidence trick pulled by RS Nagarwala in the name of prime minister Indira Gandhi; and some insights into the life of the legendary RK Talwar, chairman of State Bank of India (SBI) when it was nationalised, up to 1976 when he was made to resign by Sanjay Gandhi. He also touches upon how RBI did nothing to stop the controversial portfolio management scheme run by public sector banks in the late 1980s and early 1990s, that went on to form a big part of the securities scam investigation after 1992, and the vicious slander campaigns run by senior bankers in their bid for the chairman’s post.
Mr Ghosh has devoted relatively less space to his own term at SBI, which, many would argue, was his biggest contribution to Indian banking. According to Mr Ghosh, his most memorable event at SBI is the agreement he structured with the bank union on computerisation. He says that the agreement “was the springboard that helped my successors to catapult the Bank into the technology age.” Actually, Mr Ghosh did a lot more than that. He literally made SBI, the elephant, dance, in the days before India formally adopted the path of economic liberalisation. But, given some of the subsequent developments, clearly, he did not want to go down that memory lane.
The chapters on SBI do provide a first-hand account of various initiatives, such as setting up separate subsidiaries for merchant banking and mutual fund business; he also makes a passing mention about revitalising SBI’s treasury operations (which used to be brazenly exploited by foreign banks until he came on the scene) to make it a big contributor to its profits. But it does not quite capture the environment of the late 1980s when SBI struggled with a slow and unresponsive RBI and finance ministry; it was tough to even make global rating agencies consider rating the Bank. Those were also the days when, under the controversial chairman B Ratnakar, Canara Bank was hard on the heels of SBI, quickly matching each of its actions and competing hard for business. Meanwhile, Unit Trust of India (UTI), under MJ Pherwani, had grown into an investment behemoth which was spreading its tentacles in various directions. They, along with a few aggressive foreign banks, ended up creating a culture of cutting corners, or what was described as ‘cowboy banking’, which ultimately led to the securities scam of 1992. Tragically for SBI, the scam story, which I broke in 1992, began at the Bank, due to the collusion of one of its managers with Harshad Mehta. But the ham-handed investigation that followed and callous attitude of RBI and ministry of finance, destroyed the lives of persons like
CL Khemani who had made a big contribution to the SBI’s profits.
A lot has been written, and forgotten, about the sordid saga of the brazen takeover of Larsen & Toubro by the Ambanis in collusion with bankers and government officials. Mr Ghosh’s first-hand account in a courageous single chapter, which he had “half a mind to skip”, is reason enough to buy this book. It exposes the venality of Indian bankers and bureaucrats and the hypocrisy of corporate governance; but for the integrity and toughness of a few like
Mr Ghosh, India’s slide into crony capitalism and all its evils would have occurred even before the country was set free by economic liberalisation. The turnaround of Peerless, the only major residuary non-banking finance company, other than Sahara, is also interesting, especially when one is witnessing what is happening with the Sahara pariwar.
Mr Ghosh’s book, along with other candid accounts by retired bureaucrats such as GV Ramakrishna, is an important addition to India’s economic history, especially because every official account is a sanitised version, usually written by pliant academics who have no truck with the real discussions and machinations that dictate events and policy. Having said that, several chapters, like the L&T saga, deserve to become independent books themselves. Otherwise, only small fragments of India’s corporate and economic history—as captured in books like these—will be preserved for posterity.