Rogue bankers

The CBI’s chargesheet against absconding liquor baron Vijay Mallya and arrest of former IDBI Bank officials has once again brought to the fore the cozy nexus between rogue bankers and some stinking rich borrowers. In 2009 when IDBI Bank granted Rs 1,000-crore loan to Kingfisher in three tranches, the parlous finces and low credit rating of Mallya’s embattled airlines was already well known. When Mallya first applied for a corporate loan of Rs 750 crore — the concerned IDBI Bank official noted that by March 2009, Kingfisher’s debt level was already high at over Rs 5,665 crore including unsecured bank loans, ‘indicating a major risk burden on the banking system’. This official in his report gave Kingfisher a low rating of B (2.09 out of 6) with score of 45. But wheels began to turn and this official was over-ruled by higher-ups who upgraded Kingfisher’s rating to BB and score to 50, even as they carefully avoided recording their reasons for doing so in the minutes of loan application review meetings. It transpires that by then, Mallya had already gone to work upon the then IDBI Bank chairman for two short term loans, which were granted immediately. Thereafter, when IDBI Bank’s credit committee met to consider Mallya’s corporate loan application, he had the gall to inform them that there was ‘no need’ to pledge Kingfisher’s unencumbered shares — a mandatory condition to get the loan — because he had already discussed the matter with the IDBI Bank boss and his position had been ‘accepted’! Thus it was that RBI guidelines were ignored by IDBI Bank authority in its haste to give Mallya a loan, and the rest is history. He ended up defaulting on loans worth Rs 9,000 crores taken from 17 banks, fled the country, and from his feathered nest in Britain, he is now heaping scorn on investigating agencies with his tweets. In its chargesheet, the CBI has slapped IPC sections related to crimil conspiracy, cheating and provisions of Prevention of Corruption Act on Mallya and accused bank officials. It will be interesting to see what more damning information sleuths dig up about top honchos of other banks who fell over themselves to accommodate a dodgy customer like Mallya.

But Vijay Mallya is no exception — in fact, the extent to which banks go to bail out rich defaulters many-a-times is difficult to believe. It is also hard to stomach for a farmer or first-time entrepreneur for whom that much-prayed-for, potentially life-changing bank loan will never materialize. The situation is much worse in a state like Assam; ask most new entrepreneurs here, and they are likely to come out with horror stories of vainly pursuing banks for credit support. Banks in Assam, whether tiolized or private, are so unwilling to give loans that the credit-deposit (CD) ratio of most banks is way below the 60 percent benchmark set by the Reserve Bank. During the 2015-16 fiscal, the CD ratio of most tiolized as well as PSU banks in Assam was 50.36 per cent. Bankers here seek to justify their ‘caution’ — pointing out to surrendered militants willfully defaulting on bank loans taken as part of government rehabilitation packages earlier, as well as the travails of a bank like Assam Co-operative Apex Bank Ltd saddled with loans government servants are unwilling to pay. Despite such aberrations (which need to be sternly dealt with), it is a fact that house owners of modest means have been med and shamed in public notifications here and car owners have had their cars stched away for missing loan installments. If banks need to be strict with errant borrowers, the same treatment should be given to those who are well-heeled. But that is not likely to happen soon with the government itself arguing that ‘ming and shaming’ rich defaulters will hurt loan raising, and thereby business sentiment. This mollycoddling extends down the line, with bank authorities helping big defaulters with ‘debt restructuring’ devices, like giving them a year or two off to repay loans at lower interest rates, or packaging a part of that bad loan as equity. The situation has come to such a pass that only last November, a hapless State Bank of India had to write off Rs 7,016 crore owed by 63 willful defaulters, including Rs 1,201 crore by Vijay Mallya. The problem is aggravated by corrupt bank officials favoring the rich (for a generous consideration) with depositors’ money. Now that the country is getting to see the manner such officials are undermining the demonetization exercise by helping to launder black money, no leniency should be shown to them.