THE VILLAIN OF ALL TIMES!

By Ruma Dubey

Oh how we all LOVE to hate Vijay Mallya!

Every time we see him on TV or his picture in newspapers, it fills one with a deep sense of repugnancy. He epitomizes all that which is rotten in our Indian system today. He shows what crony capitalism is all about. He has shown one how if one has the money, he/she can buy anything – right from law to the entire bureaucracy. He has shown how politicians, bureaucrats and the banks have a murky nexus which runs deep, right into the very core of what we call “Mother India”. Yes, he has shown how one can live life king size!

Mallya has been declared a willful defaulter and banks are waking up late, probably when Mallya has flown the nest, trying to recover money. This is really a big joke, a tight slap on all our faces. Here is a man who has been flaunting his wealth and life style in full public view, even when he had stopped paying his employees their salaries. Banks are still reeling under the NPAs created by him. We are not talking about lose change here – a scam of Rs,7000 crore and more if one takes into account the interest which the banks could have earned had the money been with them. Yet, not only does he continue to live life as usual but will now even get money from United Spirts, some $75 million. Isn’t this downright shameful?

So why do we have this hypocrisy in banking? While a small individual, for a smaller loan, is punished hard and long, the bigger fraudsters, are not only allowed to default, but they are granted more loans despite a pathetic credit history. Forget arresting, their personal properties are not ever attached. And we cannot know the names of the defaulters because RBI has refused to divulge the names of the defaulters against whom no suits have been filed, citing secrecy clauses. And these corporate honchos have today burdened the entire banking system and made healthy banks into debt holes. Aren’t they economic terrorists’?

Bad loans cannot be blamed entirely on high interest rates and lower economic growth. Banks are to be blamed because when it comes to big companies, they have no verification process of end use of the funds, poor assessment and a meaningless recovery process. Banks, as per the rule book, can get a representation on the Board of the borrower firm but how many banks have actually exercised that rule?

In PSU banks, currently big ticket loans, which is up to Rs.400 crore get sanctioned by a ‘committee’ of the CMD, Executive director and GMs. Now who will stand against the CMD when he gives the go-ahead? And if the others get a ‘cut’ too, getting big loans is really no hassle as long as you have connections to reach the CMD.

Unfortunately, what this now means is that small and medium term borrowers will pay the price – probes, rules and regulations will go up following this and they are ones who will be subjected to them. The top companies will continue to flout and make merry.

A systemic overhaul is required. Of course a change in the entire value system of India is needed but that’s an impossible task. So let’s look at what can realistically be done:

• A complete overhaul of this system of sanctioning loans is required. Maybe like in the past, all big ticket loans should be reverted back to the Board of Directors. Bank chiefs have proven they cannot handle such power, so best to take that away from them.
• The RBI, if it can, maybe probe into the ‘price’ which one has to pay for promotions as that more or less decides who is more liable to take bribes to make up for the ‘price’ paid for the promotion.
• A probe into appointment of Independent directors on the Board of PSU banks; that it itself will tell a new tale of corruption.
• We need to completely change the risk-return ratio equation. Currently, the return is more or equal to the risk taken with the probability of being caught being almost zilch. Like the USA, we need to impose huge penalties, running into crores for offences committed for lakhs.