Shiban Khaibri
Can banks be used for catering to the whims of political interference that has unfortunately been witnessed in many ways post 1969 nationalization of Banks in most cases without having a telling effect on its financial health? In the case of Vijay Malia, we know how lending norms and prerequisites of sanctioning of advance facilities by banks whether individually or in a consortium, of high amount, could be compromised with the visible as well as invisible hand of political interference. In a latest case, the first of its kind, we find both political invisible hand as well as a systematic malaise in tandem, wrecking the banking equilibrium of lending resulting in net losses. No doubt , only after nationalization of banks did we see a huge transformation in our agricultural sector and allied activities with actual participation of banks putting to an end almost all private money lenders’ hay days, to cater to micro agricultural credit, at a very high cost.
This writer, with the Banking background, has been witness to how the parched land, for example in UP during serving there, which had been rendered barren produced as much as two to three crops during a year thanks to sanctioning of loans by banks for pump sets and other small irrigation facilities, giving a fillip to farm produce as well as in the income of the farmers. In the same way, various poverty alleviation schemes extended by the banks in the rural sector resulted in a lot of difference. Many schemes thereafter starting from the political ambitious ones like 20 point economic programme etc heralded the era of political interference into a purely technical, rules and procedures oriented and subjecting to careful scrutiny banking system. That , however, does not mean that in poverty alleviation programmes , Banks did not face problems of defaulting loan accounts, in most of the cases from willful defaulters.
The concept of retail banking paved the way for the vast spread of risk factor and increasing of the advances portfolio and consequent increase in registering of profits .Incomes , it may be recalled were made on actual accrual and receipts basis following adopting of income recognition and assets classification norms which delineated how an asset turned non performing . It is this prevention of an asset getting turned into a non performing one that undue and unwarranted restructuring of loan with additional supportive dose of amount is sanctioned in high risk advances mostly on considerations backed by political influence or the fear of losing an asset slip to non performing one. Vijay Malia’s whooping Rs. 9000 crore plus up to date interest and penal interest works out to Rs.12000 crore . It is an admitted fact that right from the then top authority in the Vit Mantralaya to the Prime Minister’s office Mallia’s case was treated entirely on non banking technical norms and largely on political interference. While the UPA government is solely responsible for that loot by Malia and not availing of the advance facilities for genuine reason, the NDA government is equally responsible in not preventing the criminal defaulter from fleeing the country.
Another sapling sown during the UPA government has grown into a menacing huge thorny monster in the form of finding an escape through a systematic failure outside the Finacle software of the Punjab National Bank and other banks. This took place through Letter of Undertaking (LOU) which simply means a facility under which a Bank facilitates its client to avail of funds, on a short term, usually from a foreign branch of some other bank. This comes under Bank Guarantee portfolio. LOU is another face of a Bank Guarantee. There is a term associated with lending called “Margin”. It is this Margin that in a way unfolded the huge loot by Nirav and Co,.
One Nirav Modi, a fake diamond merchant “managed” this loot with actual connivance of bank staff reportedly backed by the “Higher ups” that did matter in the political and administrative circles then. It is said, that the initiation of this high calibrated but spine chilling loot started from 2004- 05 itself. Modi neither had a proper credit limit nor did he ever deposit the margin money and all huge transactions took place brazenly outside and in the absence of the noting, recording, sanctioning, monitoring and post sanction scrutiny of the huge funds availed rather looted by Nirav and his Mamu Choksi. The Bank books , records, documents , security to back the funds were even not thought of as the modus operandi adopted was kept outside the usual mentioning in the books and subjecting the same to internal audits usually very much foolproof , statutory audits usually immediately after yearly closing of books and the strict audit conducted by the Reserve Bank of India. That all these audits failed cannot be stomached at the first instance unless the system does not reveal it as the audit verifies whether each and every norm was complied with. Axis Bank, Allahabad Bank etc made the payments to Nirav and his gang solely on the basis of LOUs issued by the Punjab National Bank. And on the basis of the guarantees issued or the LOUs handed over, the Reserve Bank Of India recently directed the PNB to pay to those banks the monies raised by Nirav and his cohorts.
In other words, Nirav is supposed to pay off his loans but all these loans are there without any funds, while on the other hand the Punjab National Bank, being duty bound had to honour its commitment by actually paying in respect of the requisite LOUs issued by it on behalf of Nirav. It is here that the PNB paid from its public money in trust with it on behalf of Nirav without actually getting a single Rupee from the master cheat. Nearly 18 employees of the PNB are suspended. The big fish both from the Banking sector as well as from all those in the Ministry of Finance and Banking including the then bosses in the Reserve Bank Of India must face charges of criminal negligence,. Conspiracy and causing loss to the public exchequer as also those in the ruling clique .
A few pertinent questions need answer. Do the revelations of the whistle blower, the then Director on the Board of Allahabad Bank, Dinesh Dubey expose the nexus of the then political high ups and other members on the Board ? Why was Dubey asked to withdraw the dissent note written by him objecting to granting of added facilities to Nirav Modi? If Dubey , as per his deposition on a leading National TV channel , is to be not doubted , then who wanted to pacify him by saying , “Scams were necessary for the Banks to function”? Why did the then Finance Minister casually reportedly sign the resignation letter from the Board membership of Dubey? Dubey revealed that the Finance Ministry top official told him, “There was pressure from the higher ups” , what for and from whom the pressure was there and pressure for what? Why the frauds come into the limelight only when the cheats and modern day Gaznavis escape the country? If the UPA Government’s culpability is there in this scam as it started in their regime, what role did the NDA perform and whether they came to know about it just a few days back only? What is Modi government doing to get the top cheats Nirav Modi and Mehul Choksi dragging back to India out from their life of sleaze, luxury and enjoyments from massive empires raised in New York, London etc? What stringent surveillance system has now been put into operation to altogether stop any further novel type of frauds in the banks as public cannot with its money always bail out the sinking and stinking banking system wherever present.
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