Setback to regional peace

By Atul Cowshik

Barring some unforeseen factors, Gen Parvez Musharraf is now well on way to becoming the life-long President of Pakistan. The farcical referendum he held on April 30 to give himself an initial extension of five years in office is only a ruse for seeking several such extensions - through means fair and foul.

There is naturally some anxiety about the fallout of the referendum on India and the western countries. Will the West, led by President George Bush of the US, keep up its kid-glove treatment of the Pakistani dictator and continue to condole his roguish activities because of his "key role" (?) in the so-called war against terrorism?

Those in India who have been mistaking the Pakistani dictator's PR skills for substance may be disillusioned as they examine the future course Musharraf adopts in his country to restore "genuine" democracy and take Pakistan out of the jehadi/fundamentalist culture that has held sway over in the country for over 20 years. The eulogistic assessment of Musharraf in some quarters in India may well have to be disowned because the post-referendum Musharraf is going to be more daring in imposing his brand of democracy, which will be closer to dictatorship, and a certain step in his anti-India rhetoric.

The western countries may continue to shut their eyes towards the kind of democracy he practises and also ignore his anti-India policies as long as Washington thinks it can stop Pakistan from breeding Al - Qaeda type of terrorists who target the US. It is o.k. with Washington if they spread their terror network in Kashmir or anywhere else far off.

Musharraf's commitment to root out religious fundamentalism, made under pressure from the US, had always looked suspicious in India. He had repeatedly "rolled back" all the stern steps he had announced against them. Washington deliberately chose to overlook this in the past; it is to be seen how long will this policy of benign oversight will continue.

The religious parties in Pakistan nurture the jehadi culture with tacit Government approval. These religious parties have who threatened to turn against Musharraf if he steps beyond a limit in curbing them. What is to be seen is who retraces his step first -- Musharraf or the threatening jehadi outfits. Successive Governments have found the religious parties to be useful tools for keeping alive the anti-India hysteria which helps the administration in being shielded from critical domestic scrutiny.

It is not clear if the Government of India has any long-term policy on dealing with the implacable foe in the western neighbourhood, regardless of the length of his office. Nearly everything that the present NDA Government does is born out of a short-term view. Look at the borders where troops have been concentrated but nobody quite knows for how long. It is quite clear that Pakistan under Musharraf and his jehadi ISI will not stop supporting terrorism. So to make the withdrawal of troops from the border conditional upon Pakistan ending cross-border terrorism can only mean their indefinite stationing at the border.

But troops cannot be stationed at the border perennially; nor can they be kept in "idle" conditions. Therefore, the two possible future scenarios are: India launches its much talked about but never implemented "hot pursuit" policy to nab the Pakistani and other foreign hired terrorists trying to enter India from their havens in Pakistan and Pakistan-occupied Kashmir; India unilaterally declares its intention to withdraw troops from the border. In either case Musharraf is likely to have the last laugh.

While it may be difficult to predict a sure success of the "hot pursuit" policy, it cannot be pursued with full vigour as long as George Bush & Co continue to extend their blind support to Musharraf. The second option will bring such a loss of face for the NDA Government that the electoral "gains" that accrued to it from Gujarat will be totally wiped out. In fact, the Parivar and the Hindutva lobby are likely to be the most irked by the unilateral announcement of troops withdrawal without showing any favourable results.

The indefinite continuation of Musharraf, not a man of peace, will also ensure that Indo-Pak relations go further downhill. It is inconceivable at the moment to see any improvement in relations between New Delhi and Islamabad as long as the General remains the master of his country. His references to India, which are frequent, are always menacing and often couched in street language. He is forever screaming before his home audiences that he wants to "teach a lesson" to India. But, both out of fear of his foreign patrons and the knowledge of his army's lack of strength he dare not intitiate a war against India. That makes him more frustrated.

What could worry India in years to come is that Musharraf's arrogance will grow as will his ambitions. His strategy could be to provoke India enough so that it leads to border skirmishes or even a full-scale war. That will give him just the excuse he has been itching for to use his stolen nuclear bombs and thus "teach a lesson" to India.

The pathological anti-Indian outlook of the Pakistani dictator comes not so much from his Mohajir (refugee) background as from his training in the Pakistani army where the focus is on jehad to be waged as a duty of the believers against the non-believers across their eastern borders. Unlike the Indian army and the armies of most other countries, there is nothing secular about the Pakistan army. The army in Pakistan is raised and maintained only to wage a war against India not to failitate good relations with India. And since the army is the most potent factor in the Pakistani establishment, the continuation of the General as the head of the country, its executive and its defence forces, rules out chances of good relations with India.

Anyone who has illusions about Musharraf being desirous of good relations with India will do well to study some of his actions and words, beginning with the Kargil war to his Agra theatrics and all his frequent addresses to his countrymen. The man believes in bluff and bluster with dramatics thrown in for effect. Recall the calculated handshake in Kathmandu with Atal Bihari Vajpayee. That might have provided a good camera opportunity but certainly does not make him a genuine believer of good neighbourly relations.

An examination of his words and deeds will also show that he can lie with a straight face. During the Kargil war he was being briefed over the telephone in distant Beijing by his chief of staff about the Pakistani army had shot down an Indian Air Force plane but, as instructed by Musharraf, got one of the jehadi outfits to claim the responsibility for it. He was "sure" that the December 13 attack on Indian Parliament was the handiwork of Indian agencies. He was also sure that India was behind the brutal murder of US journalist, Daniel Pearl. His flip-flops on the list of 20 most wanted Indians living in Pakistan or being protected by that country's ISI. The man's capacity to mislead will shame some well-known liars of World War II.

Right from the beginning of the "war" against terrorism, he has been misleading and misguiding the Americans and the world, especially about his country's continued support to terrorist outfits. Now that Musharraf has acquired "legitimacy" through a "referendum" he will hesitate even less to use these skills to pull wool over the eyes of the world.

How and there have Osama bin Laden and Mullah Omar disappeared"? Among the Al Qaeda prisoners taken in Afghanistan the overwhelming majority belong to Pakistan. The Americans and the Afghans have released many of them - numbering in hundreds - as though they were honoured guests. Yet the captors of these Pakistanis, knowing full well that the next destination of the released prisoners will be Kashmir, let them off on Musharraf's behest.

Indian diplomacy seems to be in slumber induced by the hot weather. Now and then, some noises are heard in official quarters about the danger of jehadi elements from Pakistani heading towards India after their release from prisons in Afghanistan. But how seriously has the issue been taken up with Kabul and Washington?

Since Musharraf has already built a good relationship with the interim administration in Kabul which was initially seen as cool, if not hostile, towards Pakistan, there is little doubt that he will have a cosy relationship with the full administration in Kabul. Through covert or overt means, Musharraf will utilise his position as the sole centre of power in Pakistan to consolidate his Government's influence in Afghanistan. After that he will try to treat Afghanistan as his country's extended western frontier, as was the case during the Taliban era. But India continues to believe that Pakistan will not be able to disrupt New Delhi's ties with Kabul.

The longer tenure of the self-appointed president of Pakistan also carries with it the possibility of clouding relations between India and the US. Though both India and the US have asserted that their bilateral relations have nothing to do with relations between the US and Pakistan, the ground reality makes India suspicious of Washington's closeness to Islamabad.

It is only a matter of time before the US starts to flood Pakistan with its sophisticated weapons - as it has in the past. The only difference could be that this time around the US may not justify its deadly gifts to Pakistan in the name of maintaining a military "balance" between the two South Asian neighbours.

Of course, India cannot wish away Musharraf. Whether Musharraf is as hugely popular in his country as he claims to be is not the point in Indo-Pak relations at the moment. India has to evolve a policy towards Pakistan that takes into account the fact that Musharraf with all his anti-Indian baggage will be there for a very long time. In all probability he may retain the patronage of the West without doing much that shows him as genuinely desirous of good neighbourly relations with India.

- Syndicate Features

Banks gear up for debt recovery

By Dr Navin Chandra Joshi

Early in January this year (2002) the Reserve Bank of India (RBI) in-troduced corporate debt restructuring (CDR) scheme in a bid to avoid further accumulation on non-performing assets (NPAs) in banks and financial institutions. The prime objective of the CDR framework is to ensure a timely and transparent mechanism for restructuring of corporate debts and of viable corporate entities affected by internal and external factors.

The scheme is applicable only to multiple banking or consortium accounts with outstanding exposure of Rs 20 crore and above with banks and financial institutions. Already such a scheme is being implemented in countries like the UK, Thailand, Korea, Malaysia and other countries.

The CDR scheme is outside the purview of the Board of Industrial and Financial Reconstruction (BIFR) and Debt Recovery Tribunal (DRT). It assumes extra significance as it would give an opportunity for both banks and financial institutions and the Corporate borrowers to reschedule their respective loans to avoid formations of NPAs.

The Union Government is also exploring the possibilities of roping in world bank, International Finance Corporation and Asian Development Bank for the proposed Assect Reconstruction Company (ARC) in order to recover bulk of the non-performing assets of banks worth over Rs56,000 crore. The step is being taken keeping into account the huge capitalisation needs of the ARC. A combined Bill on foreclosure, securitisation and ARC will be introduced in parliament in the next session.

According to official figures, the NPAs of public sector banks and financial institutions stood at over Rs 72,000 crore at the end of December 2001. The top ten defaulters are India's big corporate houses. The NPAs to Advances ratio of the 27 public sector banks happens to be a round 8.1 per cent.

The Union Finance Minister Yashwant Sinha is on record having told chiefs of public sector banks to vigorously pursue the cases of major wilful defaulters of bank loans in courts and set an example by sending some of them to jail. Today, there are 27 tribunals and banks need no longer pursue the cases in civil courts which took a long time. The DRTs can attach the property of the defaulters even during the hearing of the case.

Banks should follow the prudential norms, and at the same time, be proactive in lending.

Recently, the Union Government outlined a five-point strategy on recovering NPAs while urging that the professional bankers must create conditions so thatnew NPAs are not created.

The five-point strategy to be adopted was (a) to stem the tide and avoid creation of fresh NPAs, (b) to upgrade the stick accounts (c) settle the NPAs through settlement advisory boards, (d) to write-off loans on a fast track, and finally (e) not to spare the wilful defaulters. The Finance Minister asked banks to drag all the wilful defaulters to the debt recovery tribunals (DRTs) and recover the banks' money at all cost.

Also, in May 1000 the TT Andhyarujina Committee formed to give effect to the suggestions made by the Narasimham Committee on Banking Reforms, suggested (Report May 2000) extensive legal changes to confer larger powers on debt recovery tribunals for expeditious disposal of claims by banks and financial institutions.

With a view to speeding up the debt recovery process by public sector banks, three leading banks viz State Bank of India, Punjab National Bank and Canara Bank were asked to act as the lead bank for the DRTs in Kolkata, New Delhi and Bangalore respectively. These banks were to give the necessary secretarial support and infrastructural help to their DRTs.

There is no gainsaying that at a time when the banking sector is in for competition because of diminishing rates of interest, it has become imperative for the public sector banks to reduce their bad debts and this would be one of the ways to meet such a challenge during 2002.

It may be pointed out that non-performing assets of banks are those assets on which a bank is not getting the yield assets which are not really assets, so to speak, except for book-keeping purposes. According to the Report of M Narasimham Committee on Financial System (1991), an asset would be considered non-performing if interest on it remained due for a period exceeding 180 days at the balance sheet date.

It is also well-known that such balance sheets continue to conceal the names of defaulters, despite the RBI directive to make public the names of those who have defaulted upto Rs 1 crore. No wonder, the balance sheets of banks just do not reveal the extent of their true liability.

In order to expedite recovery of NPAs, the Narasimham Committee had suggested setting up of special Debt Recovery Tribunals (DRTs), following which the Government passed the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. These tribunals were set up to try suits of the value of over Rs 10 lakhs, while High Courts and district courts would take up cases of lesser values.

It was expected that the special tribunals would speed up the process of recovery, latest within six months. However, it is, a known fact that they have not been able to do so. Even today over 4,000 cases are pending in these tribunals which also seem to be quite inadequate in number. Besides, the tribunals are handicapped because of various lacunae existing in the law meant for the purpose. It is high time that they are removed and speed recovery process is put in full gear.

The most unfortunate phenomenon is that the issue of past burden of banks ' debts has not received sufficient attention by the government and the banks themselves. If the current proposal of merging some public sector banks is implemented, then the problem of NPAs would come in the way of effective reforms.

The Narasimham Committee also suggested setting up of an Asset Reconstruction Fund (ARF) to take off past debt from the balance sheets of banks, even though provisions had been made against them, so that the funds realised through this process could be recycled into more productive assets. However, the ARF was only a one-time measure to relieve banks with a heavy burden of past debt.

It was also suggested that where the number and size of bad debts of a merged bank are large, and therefore administratively difficult to handle, the staffof the ARF could help improve recovery of loans, leaving commercial banks to concentrate on fresh lending, improving profitability and streamlining its working. In any case, adopting the ARF option was only a part of the package for revival of banks but the Government did not act in this respect.

As for the target for reducing NPAs, the policy has been to bring them down to the level of least 4 per cent of the present level. All nationalised banks need to have documents of loan recovery policy approved by its board and to effect maximum recoveries, particularly out of NPA accounts.

The recent move to reduce government equity to 33 per cent in banks was aimed at recapitalisation of banks by tapping capital market as the government did not have the money to provide for that.

There have been a number of factors responsible for the sorry state of affairs in India's banking industry as far as accumulation of huge debt is concerned. Dearth of trained personnel, direct lending and directed investments, politicking in the appointment of the top brass of banks, politically motivated loan melas and lan waiver schemes and te general malady of 'corruption'- these all have contributed to the muddle in the banking sector.

Today, however, the worst situation is that the financial accounts of banks do not show provisions for bad and doubtful debts separately with the result that no yearly comparison is possible to be made not it is clear if reserves made are adequate enough or not. It is time banks dropped their old habits and become more transparent.

They should therefore, make changes in the format of the balance sheet to show separately the gross advances and investments, provisions for bad and doubtful debts, amount of advances written off, provision for depreciation on investments, provision for interst tax, provision for income-tax and other provisions. It is also time that all reserves are shown distinctly on the face of the balance sheet and are not hidden from the public. The citizen's right to information is quite sacrosanct. Would it be too much to expect from our banks that citizen's right to full information is respected in letter and spirit ?

Banks need to understand that bad debts recovery is an important plank for judging the efficient performance or otherwise of a bank. Why have the banks failed to announce the names of major defaulters? A secrecy on this score is not desirable in a regime of reforms and transparency.

PTI Feature