“Tell me, Mr Banerjee,” said the deputy governor (DG) of the Reserve Bank of India (RBI), looking at me quizzically over the top of his reading glasses…
“How did you achieve this?”
The question mystified me as much as it did the six RBI officials sitting on either side of the DG. Everyone present knew that I had not been summoned to receive an accolade for some great achievement. Quite the contrary!
The great man jabbed at the sheaf of papers in his left hand, on which bright red circles had been drawn at various places in a big chart of numbers.
“In my four decades as a banker,” he went on, “I have seen 10% NPA (non-performing assets), 15% NPA and even 22% NPA.
“But I have never seen 93% NPA!”
“Please tell me, Mr Banerjee,”—the sarcasm was thick now—“how did you miss out on the century? It would have created an unbeatable record in the annals of banking.”
I won’t get into the grilling that followed, the analysis of the larger NPA accounts, and the remedial steps I was planning. I knew all of that was coming, so I bore it stoically.
But the parting shot from the DG hit home.
“This is not possible without collusion and corruption, Mr Banerjee,” he thundered. “You must put your house in order. Otherwise, we will come and do it for you.”
I exited as quickly as I could and on the way back to our Mumbai branch, I reflected on the parting words of wisdom from the DG.
Before I go any further, let me remove from your mind the lurking notion that I was the architect of the ‘achievement’.
No siree, it was NOT me.
As bankers will know – banks are very constipated. The whatyoumaycallit that hits the fan is very old stuff. In other words, the perpetrator of a mess usually has enough time to exit, and the mess lands squarely on the lap of his successor.
The background, then…
Six months earlier, I had taken over as the head of corporate banking in a bank in another Middle Eastern country. Apart from the home portfolio of corporate loans, I was also responsible for the loans in our small operations in India and Pakistan.
Having overseen corporate lending in Pakistan while working with my earlier bank, I was apprehensive about what I had inherited in the Pakistan operation. Hence, I asked for the list of borrowers in Pakistan together with their outstanding loans. Fortunately, almost all the names, except a few minor ones, were multinational corporations (MNCs) and big business houses—no small fry—and I was familiar with them. No apparent problems here, I said to myself.
Then I turned to the India list. A quick glance and my heart sank.
The names on the list were either companies on the verge of collapse (this was 1998 when the world was going through a recession), or totally unknown names with large outstanding and very high interest rates.
One name particularly stuck out.
Some 12 years earlier, when in India, I had started a relationship with an Indian business house by providing a modest credit line, which my successors had apparently increased steadily, year after year.
A year earlier, when in Dubai, I received a phone call from the chairman of the group, asking me whether my bank would like to participate in an overseas syndicated loan for his company.
I was surprised to hear from the chairman after nearly a decade, so I stalled for time, ended the call, and phoned my friend, who was still working in my old bank in India. I asked him whether it would be a good idea to lend to this company.
“Absolutely great idea,” he said, “top-notch idea. Only… send the money to their account with us. It will reduce our bad debt.”
And this company was the biggest borrower of our Indian branch!
I felt very apprehensive and ran to my boss, the general manager (GM), to share my fear that the Indian loan book was bad. He was surprised to hear this because our country manager (CM) in India (appointed two years earlier) had been telling him that he had a very sound loan book, and with excellent income. The loans were being serviced and the audit report was clean.
Nevertheless, he was sufficiently alarmed by my misgivings to fly with me to Mumbai the next day.
The CM was very, very defensive. He kept saying things like:
-I don’t get into the nitty-gritty.
- I have a branch to run—staff matters, deposit customers, RBI, auditors…
- You must ask the credit boys—they do the lending.
- etc. etc.
The credit boys were equally evasive. They hemmed and hawed, wanted time to look at the files, had to leave for a client meeting, et al. No direct answers were forthcoming.
One comment made by the CM later in the day set my alarm bells ringing.
I said, in passing, that some of the accounts looked like they had been sourced by brokers.
The CM piped up, “Of course! Brokers are a must. It is impossible to get business without the help of brokers.”
To explain – a broker is a tout who acts as the intermediary between a corrupt banker and a borrower who has no intention of repaying any loan. The broker connects the two, collects his commission, the banker sanctions the loan and gets five or more per cent of the loan amount, and the borrower defaults after a year or two, preferably after the banker has been transferred (or has resigned).
That evening, I invited the three credit chaps to my hotel room for a drink, plied them with Scotch, and gradually steered the conversation to the loan book. One by one, they opened up.
They didn’t know the borrowers at all, they said. Brokers came to the CM, he instructed the credit department to prepare the proposals, the papers were sent to head office (HO), approvals came on the basis of strong recommendations from the CM, and the money was disbursed.
I suspect that one of the credit chaps must have informed the CM of our conversation because there was a big drama the next morning.
When I asked the CM, in the presence of the GM, to explain how the brokers had helped him, he suddenly burst out in anger, “Am I under suspicion?” and raved and ranted along these lines.
The GM and I tried to pacify him, but his ranting increased. He popped a couple of pills from bottles in his briefcase and suddenly let out a shriek of pain and collapsed in his chair.
As you might have guessed, he went to the hospital (a private room at Jaslok, no less) stayed there for a fortnight, and sent a letter of resignation accompanied by a letter from the doctor recommending complete bed rest for three months.
The GM refused to take any action—no enquiry, no audit,nothing. I was left to handle the mess.
I stayed on in Mumbai and met the corporate borrowers one by one. A snippet from one such meeting will serve to illustrate the nature of these clients.
“Arre saab, khali-pili tension mat lo. Sab kuch aisa-hi chalta hai. Kuch lene ka, kuch dene ka. Kyon, saab?” (Synopsis – only usual give-and-take, sir)
Need I say more?
At least I saved 7%!
(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post-retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world (until Covid, that is), playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)