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?
Foremost is the credit risk assessment. Second is the group lending/ consortium lending. Third is the PPPs of the industries with the government over the supply of goods and services by the India Inc and SME sector. Fourth, is the lenders'liability. Fifth, is the speed of justice in matters relating to debt in all the Court cases. Sixth, the RBI should rethink its model of universal banking where cross-selling of products has weakened the financial system. Seventh, digital banking transformation should be not at the cost of customer service. Eighth, PSBs should not throw social banking to an insignificant corner consigned only to pleasing the powers instead of serving the sectors. Ninth, Banks should devote greater attention to the HR risks more succinctly. Tenth, discerning eye on frauds and cyber risks is imperative.
However, I have my grave doubts about such persons ever getting tried and punished, especially in reasonable period of time.
It is also typical that the Kleptocracy will frame a fall guy to distract attention from the real perpetrators who are Kleptocrats to a man. Speaking of Air India, consider the case of Mr. Vijay Malya:
While Kingfisher is a typical legerdemain of Indian Crony capitalism, one must not forget the Ice Berg that sank the Titanic. Kingfisher was addressing a specific market segment. The Business Traveller who was sick of the insouciance of India's public sector carrier and different from the other private Indian operators who were addressing the low cost market. Kingfisher was doing quite well until it hit the turbulence created by Sonia Gandhi's Sharad Pawar's Praful Patel (Yes, the same member of Manmohan's "Coalition Dharma" aka "parivar-that-loots-together-to-stay-together who bought Honest Antony's wife's paintings for Air India).
Patel bought an enormous number of Boeing aircraft that nobody wanted and Air India's plans and estimates did not warrant for Air India that drowned the Indian Air Passenger market with excess capacity sinking Kingfisher. Air India would have drowned too. But, because it is a Public Sector, it has been kept flying at the cost of India's growing deficit, inflation and other tax payments. Praful Patel then went on to sell Air India's newly acquired Aircraft at far below cost to Etihaad Airlines. He also sold several of Air India's prized and high potential routes and landing rights. The people of India have and are paying far more for the Air India black hole that Sonia's Pawar's Patel made than The King Fisher debt which is merely a part of the whole.
Who arm twisted the Banks to finance Kingfisher on the collateral of a "Brand" (A first anywhere in the World). Chidambaram or Pranab Mukherjee?
It would be good when superficial Journalists, Bankers, Central Bankers and Politicians refer to Vijay Mallya's Kingfisher, they also refer to the Senior and bigger of the Siamese Twins that has drained the Public coffers. Praful Patel's Air India. (I wonder whether Pawar's Baramati and Mallya had a spat over booze leading to the enormous bill presented to Indian Citizens by Praful Patel ?)
*Note: PANGOLIN: An enemy of India who believes in inequality under law, exceptions to the rule of law and persecution of some for the benefit of others. At present, the sole purpose of the Indian Republic, Constitutional or otherwise, is to pamper and provide for certain constitutionally preferred sections of society who the British found useful to hold and exploit India at the cost of those who the British hated and persecuted. The Pangolin is a creature that is unique to India and feeds on ants that are known in nature to be industrious and hard working if not quite as fruitful as bees who flee to better climes. (PANGOLIN is an acronym for the Periyar-Ambedkar-Nehru-Gandhi-Other (alien) Religions-Communist Consensus that usurped the British Mantle and has worn it with elan to loot, plunder, and rape India since 1921 and re write History and laws to their exclusive benefit since 1947)
India's Economy too has been ruined with more than six decades of unaccountable profligacy and corruption that have swollen the deficit and reduced the Rupee to a point where China and Pakistan have to reassess the cost-benefit of forging Indian currency to corrode the Indian economy. Rajan is sleepless on a bed of others' making.
The First Governor of RBI Mr Rama Rau was sacked by Nehru Government after he had a disagreement with TT Krishnamachary. Nehru refused to intervene and save Rama Rau from being publicly insulted by TTK.
S Jagannathan was sacked by Indira Government for refusing to increase credit limit of Sanjay Gandhi's pet project Maruti.
KR Puri was sacked by Janata Government because they thought he was too close to Sanjay Gandhi.
Manmohan Singh was given marching orders by Rajeev Government because he was considered too old school.
RN Malhotra resigned after the FM in Chandrasekhar Government Mr Yashvant Sinha hinted him to do so
Indeed the rates must be far higher than they are to cover sixty years of corruption, bad loans and state profligacy reflected in the deficit and inflation . But Rajan needs to go for entirely other reasons.
Rajan began his run up to his quitting very, very thoroughly. If he hadn't quit, he should have been fired.
As I wrote several weeks ago:
1) Rajan is Anti-National.He joined Obama's tolerance chorus like any Body Shopping Magnate or other PANGOLIN* Notable, Awardee or other Camp Follower. This is unacceptable in a Governor of the Reserve Bank of India. In doing so he has abused Indian hospitality like a worthless Black Yank or Italian Bar Maid,
2) Instead of doing Central Banking, which should be felt not seen, he is seen and not felt. For example instead of watching M2 (Money supply), he is conducting public classes in Dosa Economics to distract the already diseducated public from the menace of inflation.
3) Instead of auditing Banks and Banks' lending norms and methods, he is raising political canards against individual borrowers like a politician or a PANGOLIN* journalist.
In brief, Rajan seems more of a Bollywood Khan, a Tendulkar Group Captain or a Nehruvian Romila Ashokan than a Central Banker. India already has too many of these.
And as I wrote several Months ago:
Raghu Ram Rajan should remember that he is a Central Banker and neither a politician nor a Nehru-Gandhi "Economist".
Central Bankers should not be heard but be felt in the value of the rupee, the fiscal discipline of the Government and the integrity of the Banking system.
Instead of taking time off from his work to lecture on inflation and dosas or wag a "tolerance" finger at the Prime Minister as part of the Obama-Sonia "parivar-that-loots-together-to-stay-together" chorus of Fifth Columnists, he should study M. H. De Kock, R. S. Sayers, Beckart, Altman's "Z", Tamari's Index of Risk etc. and learn to measure up to his job. Unless, of course, he is as erudition, integrity, culture and arithmetic challenged as India's Indian educated Judiciary, Bureaucracy, Police, Professors and others appointed and promoted on the basis of birth and Tehsildar's certificates.
His instruments are OMO, BR, Audit, fines, systems and methods, metrics and capping government over drafts. Not his mouth.
*Note: PANGOLIN: An enemy of India who believes in inequality under law, exceptions to the rule of law and persecution of some for the benefit of others. At present, the sole purpose of the Indian Republic, Constitutional or otherwise, is to pamper and provide for certain constitutionally preferred sections of society who the British found useful to hold and exploit India at the cost of those who the British hated and persecuted. The Pangolin is a creature that is unique to India and feeds on ants that are known in nature to be industrious and hard working if not quite as fruitful as bees who flee to better climes. (PANGOLIN is an acronym for the Periyar-Ambedkar-Nehru-Gandhi-Other (alien) Religions-Communist Consensus that usurped the British Mantle and has worn it with elan to loot, plunder, and rape India since 1921 and re write History and laws to their exclusive benefit since 1947)