This is the third article in the series on bank losses. Read the first and second articles.
The manner in which finance minister, Nirmala Sitharaman, obfuscated her reply to my starred question on August 1 shows quite clearly that government is desperate to suppress any further data on bank losses, beyond the humongous amount that is already in the public domain.
After 20 months of constant effort, one managed to ferret out the total year-wise and bank-wise details of non-performing assets (i.e, loss-making NPAs) and write-offs. These were presented through an article on The Wire on June 18, entitled The Modi Government Must Answer for India’s Historic Bank Loss of Rs 12 lakh crore. It covered the first eight years, nine months of Modi’s rule, but now that we have the Reserve Bank (RBI) figure for the full nine years, the amount lost by all banks increases from Rs 12,09,606 crore to Rs 12,50,553 crore.
Never before in the history of India had banks lost and wiped out such a gigantic amount, year after year, without a whisper of a scam or any public debate of consequence. As expected, public sector banks were hit the most, but private banks also picked up this virus and suffered. Retribution has, of course, been sharper and swifter in private banks – as Yes Bank’s Rana Kapoor and Chanda Kochhar of ICICI realised to their cost.
In this third article of the series (read the first and second articles), we reiterate with updated data how our bank deposits were used to square the accounts of wilful defaulters, asset-strippers, and politically blessed fraudsters. Many among the latter who rose to prominence with (and hovered around) Narendra Modi looted lakhs of crores from bank funds and then invariably scooted abroad to lovely pre-paid mansions and to other luxuries.
Also read: How in First Eight Years of Modi Government, Nearly Rs 12 Lakh Crore ‘Disappeared’
Not one has been brought back to face trial and jail by the Modi government, while the Manmohan Singh government had ensured that the mighty Ramalingam Raju went to jail for his Satyam’s frauds. Singh’s regime was booed out as corrupt by swashbuckling TV channels reporting scam after scam, which were revealed ever so dramatically by a rockstar Comptroller and Auditor General (CAG). It is a different matter, of course, that many of those TV channels later sold themselves to Modi or his capitalist buddies, and the ex-CAG is choking from the overfeed he was rewarded with by Modi.
To my pointed query on what “steps (have been) taken to recover this amount and punishments meted to each of the top twenty fraudsters”, Sitharaman replied, quite inanely, that “banks are required to lodge complaints, immediately on detection of fraud, with law enforcement agencies”. Even a child knows this, but my arrow was specifically aimed at “twenty top fraudsters” – many of whom are known personally to the PM. Bankers said many of them dropped PM’s name and showed bankers their photos with him.
Prime Minister Narendra Modi and finance minister Nirmala Sitharaman. Photo: PTI/Files
The finance minister evaded this query altogether as it may have endangered her job. But the same day her minister of state (MoS) Pankaj Chaudhary replied that the “government has so far recovered Rs 15,113 crore from people accused under the Fugitive Economic Offenders Act”. They owed over Rs 40,000 crore, so this means that they have avoided paying three-fourths of their dues.
On February 5 this year, another MoS of finance, Bhagwat Karad, replied that “the total exposure to top 10 borrowers from Scheduled Commercial Banks as reported in the Central Repository of Information on Large Credits (CRILC) database is Rs 12,71,604 crore”. So we have an idea of how much banks have lent to just the top 10 borrowers and we estimate that the top 100 may have taken five to six times this amount. Of course, if they have the right contact and indulgence, a large part of this would never be returned to banks.
This is precisely our point, and we find that banks have been saddled with some 69 lakh crore rupees of NPAs during Modi’s nine years. It was never anywhere near a small fraction of this amount during the previous nine years.
Percentages of bad loans to total loans
We understand that bank loans have also gone up substantially, so percentages of bad loans to total loans may be a better indicator. These percentages can then be compared with similar percentages of NPA as part of total bank exposure. We will then better understand what is going on in India and why it is so suspicious and so much worse than other countries of the world.
These percentages of NPA to total loans are on the IMF website – and they hover between 0.4 and 1.4 in advanced countries. Obviously, probity is higher there, cronyism is less and anti-corruption watch stronger. Italy, Spain, and Portugal have more ‘buddy-ism’ and such laxity increases their percentage of endangered loans to between 1 and 1.5 percent.
The site globaleconomy.com gives more detailed data on developing countries. China, Vietnam, Malaysia, and Cambodia are all in the 1.6 to 1.7 percent range of bad loans, while in Indonesia it is at 2.6 percent. NPAs are around 3% of total loans in Turkey, Thailand, and Brunei. In this regard, India is a disgrace, as during Modi’s nine years, NPAs have usually been 7% to 8%, and according to the finance minister, it “peaked at 11.46% as on 31.3.2018”. In 2021, her MoS mentioned in another reply that the peak was actually “12.17% in the last seven years”.
Cash. Photo: File
The short point is that if we assume 2% of endangered loans as the “international standard”, this percentage is so much higher in India. We submit that this was due to fraud, collusion, or abject misuse of bank loans and since nothing comes free some people were paid to “routinise losses”. Thus, when NPAs reached 11.46% of total loans in Modi’s India, some 9.46% (i.e., the percentage above 2) either went to line pockets, while maybe a fraction of this reflected the ‘constraints’ in our banking system.
Everyone says, no big loan is usually released without a political nod or a prod. During the last nine years, some people may have been vigorously nodding their heads, left and right, like some agile Shiro-Bheda movement of Bharat Natyam dancers. Some may argue that the international standard of 2% of loans turning sour is too harsh for India. But if most countries of the world that matter and other Asian countries can accommodate all causes for slippage in banking systems within 2% (or slightly higher), why cannot India?
Also read: The Modi Government Must Answer for India’s Historic Bank Loss of Rs 12 Lakh Crore
To get the answer, we may use night-vision glasses to see how much has been siphoned off by known cronies and other criminals during the Modi years – tragically, without any retribution.
The government now tomtoms that the percentage of NPAs to total advances came down to 4.41% on December 31, 2022. But the RBI predicts that “the gross NPA ratios of public sector banks may swell to 9.4 percent in September 2023”. It is, of course, a fact that the upward movement of NPA percentages picked up towards the end of the United Progressive Alliance government’s years. But it was still below 3%, going up to 4% in the last year. There may have been some cases of reckless lending towards the end, but Modi had nine full years to scrutinise, stabilise, and exit bad loans. Instead, bad loans doubled and tripled in his time, with bank frauds committed by his known businessmen shooting through the roof. But all is well – because most voters don’t understand banking beyond the rates for deposits and home/car loans.
Let’s move from NPAs to what money actually went up in smoke – as “written off” forever. The government claims that banks indulge in this final write-offs “to clean up their balance sheets, avail tax benefits and optimise capital” as directed by RBI. Frankly, these sound like ‘stuck records’ of days gone by and their non-stop parroting of such date-expired wisdom is tantamount to covering up unprecedented losses. Because the losses are not made by the government but by ordinary bank customers – whose money lying with banks is “adjusted” to cover up losses caused by racketeers and asset-suckers.
The same government, which pinches on every additional thousand crore rupees to the education, health, social, or rural employment sectors, wipes off Rs 12.5 lakh crores for non-repaid loans – without jailing any known scoundrel. Few realise this racket as no citizen is informed enough to question why this huge amount of “non-recoverable losses” was adjusted against their bank deposits and the hard-earned operating margins of banks. It’s all so atrociously neat and clean! We lost, they gained.
Money hardly ever disappears – it travels from one pocket to the other. A section of defaulting (or embezzling) businessmen gain from these de facto waivers called write-offs, as the heat on their backs would be less. Those big sharks who finance any ‘helpful’ political party can handle their matter quite neatly with precise “corporate organisation” and leave no trails of messy cash handling and fund transfers. Of course, if bankers, the enforcement directorate, the CBI, the directorate of revenue intelligence, the Serious Frauds Office, and other corporate and financial governance regulators are really serious, they can crack this modus operandi, very much like they hound cash transactions of the less sophisticated.
Instead of confirming the numbers of NPAs and write-offs that I had embedded in the parliament question, Sitharaman filled up a whole page with homilies supplied by some deputy secretary. On August 18, 2022, the finance ministry confirmed more or less the statement supplied by the All India Bank Employees Association (AIBEA) that just 13 non-performing assets (ie, loss-making NPAs) blew up two-thirds of their total bank loans of Rs 4.47 lakh crore. This is the type of probing query that the finance ministry is deflecting — because, frankly, political bosses shelter these embezzlers. PM Modi who goes around changing laws in bucketloads chose not to amend the existing financial laws that favour such felons. His latest insolvency resolution process ensures that banks can barely realise hardly 40 or so percent of their claims.
Videocon, for instance, had debts of Rs 46,000 crore. It was sold to Vedanta (a Modi acolyte’s company with a lot of odour) through this process for only 6% of the claims. The Rs 22,800 crore debt of ABG Shipyard was put up for liquidation at just 5% of its value – because the politically-connected owners had not only covered up repeated losses with fresh borrowings but had sucked out huge amounts of company funds for personal gain.
As if Modi and Sitharaman do not know how ineffectual their pith-sticks are on the thick backs of professional ‘bank robbers’ who divert public money for their personal wealth, after satisfying those who matter?
Jawhar Sircar is a Rajya Sabha MP and former Culture Secretary and CEO of Prasar Bharati.
