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THE WILFUL DEFAULTERS THAT RBI CONCEALS

Akhilesh Bhargava

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RBI

The giant-sized loans of tens of thousands of crores, given by banks to the most unworthy/undeserving borrowers and the soft kid-glove treatment given to them, when they deliberately defaulted, has always been shrouded in inexplicable secrecy. Bankers have been unwilling to reveal their names. Even when these powerful borrowers were found to be wilful defaulters, the bankers were unwilling to take any coercive recovery action and strangely, they were also unwilling to disclose their names. The reasons for such secretive behaviour were obvious. These scammy big ticket borrowers were the most influential, with direct access to the powers that be, in the topmost circles of Indian politics and bureaucracy. Thus, instead of naming them and taking stringent corrective action, the bankers continued to hide these frauds under the carpet, by frivolously restructuring bank loans, which had turned bad. Not only were these influential borrowers given extra time to repay, with interest rate cuts, but they were also given additional loans, as ‘rewards’ for their payment default. This entire exercise, starting from giving of the loan to its bogus restructuring, reeked of favouritism and corruption, in which these unnamed wilful defaulters, merrily had a free run below the radar.

This changed when then Reserve Bank governor Raghuram Rajan decided that enough is enough. It is clear that the RBI too had adopted a lax attitude by permitting multiple restructurings of the same account under various schemes viz. SDR, CDR, S4A etc., which helped the bankers to window dress and hide the bad loans. It was much later in the day ie. in October 2015, that Rajan insisted that banks must recognise the bad loans/NPA accounts and must provide for the losses, under an Asset Quality Review (AQR). It was perhaps that this AQR revealed alarming names and amounts, that Rajan thought it prudent to warn the PMO of the NPA crisis and also reported names of the ten biggest wilful defaulters, who had duped the banking system. It was certain that this contained names of the most powerful and politically well-connected persons, whose disclosure would not just shake the system, but would also point out the names of the powerful netas/babus, under whose patronage the banks were cheated in this manner.

Transparency and good governance demanded the disclosure of the list of these top ten fraudsters to the public, but neither the PMO nor the RBI chose to do so. And this explosive list would have remained hidden for eternity, in the secret files of the RBI and the PMO, had Rajan not mentioned it in his written testimony on the NPA crisis before the Parliamentary Committee headed by Murli Manohar Joshi.

Despite an RTI application, the RBI strangely refuses to disclose this list that Rajan had sent to the PMO. The CIC has pulled up the RBI and has directed the RBI to disclose the names of these fraudsters, within 45 days, as was ordered by the Supreme Court in its 2015 judgement. The CIC found the RBI’s stand to be absurd, reflecting an anti farmer, pro rich bias of bankers. The CIC’s ire is understandable. The nation has lost lacs of crores to influential wilful defaulters, who have cheated the system. They are dangerous white collar criminals who manipulate and subvert the system to loot it and there is simply no justification to not reveal their names. They need to be named, shamed and punished.

 

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Business Tit-Bits

What was the Harshad Mehta tax story?

Akhilesh Bhargava

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The original Big Bull of the stock market, Harshad Mehta, was being investigated by numerous authorities for the 1992 stock market scam he perpetrated. The Income Tax Department conducted raids at numerous premises of Harshad Mehta and family and siezed many documents amongs other evidences. However, there was no black money involved as the source of all money recieved was from banks and all transactions were well documented. The IT Dept gave him and his family a hard time by adding frivolous income to his total taxable amount and this case went on for 27 years, even after Harshad had himself passed away. Finally, the ITAT, the final fact finding authority, srapped most of the additions to his income of over 2,000 crore ₹ which the IT Dept had made and further went on to make some observations of their own. Unfortunately, this is also the case with most taxpayers that IT Authorities in spite of having a low success rate, tend to keep appealing the matter without a genuine case, thereby causing much difficulty to small and medium tax payers.

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Yes Bank Deliberately Misleads

Akhilesh Bhargava

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Yes Bank recently released a report by RBI which stated that it had given the private lender a clean chit and found nil divergences in asset classification and income recognition. However, this was not the whole truth and Yes Bank conveniently omitted the fact that RBI in the same Asset Quality Report had discovered non-reporting of NPAs in 2015-16 to the tune of 4,176 crore ₹ and in 2016-17 of 8,373 crore ₹. The report was also a confidential one and was not to be revealed to the public. Serious accounting malpractices and loans are given contrary to the bank’s lending policies were also found which finally led to the RBI insisting Yes Bank’s founder Rana Kapoor be removed. The RBI has promised regulatory action for this breach of trust and deliberately attempting to mislead the public which made Yes Bank’s shares rise 32% in a single day.

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Is the Jet rescue plan a hogwash?

Akhilesh Bhargava

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The debt-ridden Jet Airways, which was once India’s largest private sector airline, has declared a massive quarterly loss again and its market share has fallen and it has become a fringe player. It is also dealing with a host of other problems and its promoter Naresh Goyal is not willing to let go of his company in favour of another investor. Its largest lender, SBI has come up with a revival plan that involves converting debt into equity and this will ensure that Naresh Goyal’s stake in the company comes down to 20% and he will lose effective control over it which has to be approved by shareholders at their next meeting. What is important, however, is that Naresh Goyal should not be given to managing the airline like in case of Kingfisher Airlines back in 2011and a new management must emerge to take control. All these factors must be clearly included in the restructuring plan.

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