The Politics of NPA

Even as political outfits continue to play passing the buck game over the NPA mess and Vijay Mallya saga, they tend to forget the need of the hours which is working out a proper recovery process and legislations in place to avoid such a mess in future which not only puts the investors’ money at stake but also damages the economy of the nation. Poonam Singh interacts with senior leaders of three political parties, BJP, Congress and CPIM and brings their views on the table.

GVL Narsimha, national spokesperson of BJP, Md Salim, Member of Parliament and Politburo member of CPIM and Priyanka Chaturvedi, national spokesperson of Congress kick off a storm over cups of tea.

Q: During the UPA time as now it is being claimed, certain businessmen and industrialists like Vijay Mallya have been extended huge loans against almost no mortgage or security. It is understood even during earlier NDA regime, same practices have been done. What’s your take on this?

GVL Narsimha: This has totally happened during UPA regime and Congress party attempts to frame BJP, it’s totally baseless, Kingfisher case is a shining example of how all the credit appraisals norms have been avoided to give large sums of money without proper securities, without proper collateral, how only the Kingfisher Airline brand name, trademark was valued as securities violating the bank norms which do not take any intangible assets of such kind as securities and it did not end there. When the airline was being folded up, they have not only rescheduled the loan payment structure after declaring NPA, they also have given them bailout packages. Kingfisher is a shining example of how banks were forced to tow the line of political masters.

Md Salim: Political parties in power have always defeated the whole purpose of having nationalised banks in a country like ours. These banks are supposed to serve the poor and not the rich. But they have been behaving like private banks and multi-national banks, under political pressure. These nationalised banks are doing may be some good things like priority sector lending, rural lending but only whenever they are statutorily compiled to do so. So government after government has been changed and all of them claimed all’s well. But actually, these banks have served just a section of people, some of them are even unscrupulous elements and thus, this situation of today’s has come. I am not saying extending loans to industries is a bad idea. I am saying, extend it to the people who need it most and that too extend it against enough securities so that even if they don’t pay back, their securities can be seized and sold off to recover the dues. Banks also surprisingly do not take stern actions against such defaulters who enjoy political patronage, they even try to hide NPAs or else banks simply write off such debts showing concessions have been extended to such defaulting industries/industrialists.

Priyanka Chaturvedi: No other political party than BJP perhaps understands better how to politicize a complex issue like this. It is unfortunate that the Narendra Modi government rather than bringing in solutions to the mess, talking about who dunn it. The incumbent cabinet has been maliciously throwing mud on the previous one.

2. Now the major political parties like Congress and BJP are caught in a blamegame over the NPA issue. Banks are in mess and people who have invested in the stocks of these banks are also in a mess. What could be the road to recovery?

GVL Narsimha: No, I would contest your first part of statement, that Congress and BJP are caught in a blamegame over the NPA issue. The NPA is actually an legacy issue and its only UPA in a way NPA has become UPA. I think UPA is entirely responsible for the current situation of NPAs. During the NDA rule, the banks were in good health and thereafter UPA really converted banks into complete mess. The government has announced unbilled plan in last budget itself that it had proposed a capital infusion of Rs. 70,000 crore in last year’s budget over the three to four years period. So presently government looking at all the possible options.
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Md Salim: First is, government in country like ours should ensure people who need the money most, they should get access to bank loans, say like unemployed youths, poor farmers who are compelled to borrow from private money lenders, then the women entrepreneurs, first generation businessmen. Unfortunately, in our country certain big companies become defaulters but promoters of these companies have not been touched, the same promoters can open another account in the name of another company and carry their borrowed money from one account to another and the game continues. But these defaulters should be blacklisted and the promoters of such companies and the top ranks officers who are behind them should be awarded exemplary punishments. Unfortunately till now no punishment has been handed out to such willful or skillful defaulters.

Priyanka Chaturvedi: The willful defaulters should be brought to book at the earliest. The NDA government has been claiming that they have taken actions against Mallya, then how come he managed to escape the country—can they give a reply to this simple question?

3. Do you think the existing legal framework can still provide cover to the PSU banks?

GVL Narsimha:  I think that Bankruptcy Bill or Bankruptcy Code hopefully would be passed in this session of Parliament. Once the new Bill turns into a law, it will be faster and easier for the banks to recover their dues from defaulters like Kingfisher Airlines.

Md Salim: The functioning of these banks are normally outside the purview of the Parliamentary committee but I think it should be brought in the Parliamentary committee.

Priyanka Chaturvedi: Question is not about the legal framework, new and old. Question is whether this government at all willing to implement the existing laws against such errant borrowers. Do they really care about millions of individual investors whose interests are needed to be taken care of by their government!

5. Do you think any new legal framework needs to be brought in?

GVL Narsimha; I am not sure, if anything needs to be introduced now. This government has communicated to ensure the banking sector reforms. So what is required, the banks are to be governed or administered t completely by non -political men. So more than legal framework I think, it is more of an administrative reform that is required in the banks and our government has already set out this process. The entire credit appraisal system has been totally depoliticised. The government has ensured that there is no political interference at any level and no political leader from Parliament or minister is involved in the process of giving loans to an individual or a corporate entity.

Md Salim: Problem is no shortage of legal framework; problem is these people with the help of their money and power, play with system. Committees after committees had recommended certain suggestions and also pointed out how these loans are extended and secondly, how it was allowed over the years to become stressed assets or NPAs. But nothing happened. So rather than adding a new framework, we will have to book them under the existing legal framework only as the existing laws have enough teeth and nail, only if those are implemented against such willful defaulters.

Priyanka Chaturvedi: This is a government of event managers and they believe in creating hype over anything. So laws and no laws, don’t expect any much action on their part. They wrote of loans worth Rs 1 lakh crore during 2014-2015 and now they have been levelling wild allegations against Congress party and its leaders—how ridiculous it is!

5. Jaitley has indicated the 27 PSU banks should be merged or amalgamated and no country in the world has such huge number of govt run banks. Will it really help resolving the reigning issues? 

GVL Narsimha: Certainly amalgamation of banks is likely to avoid the lot of the complicity. I think the present government has been sincere of the matter and further discussions will be needed to help the in the banking sector.

Md Salim: This is a shortcut or over simplification, instead of addressing the real problem and this has become a hallmark for Modi’s government and Jaitley’s operations. To over simplify the problems and then try to find out some easy solutions. But no other countries have such complications on history of financial institutions. We had series of private banks, which failed earlier. Rather than standing by the Indian banking system, Jaitley’s formula will destroy the system.

Priyanka Chaturvedi: These banks were established with an intention to cater to the needs of the needy ones, poor people, middle class and first gen entrepreneurs. NDA govt during its earlier terms and this term also ensured these banks cater to the demands of rich businessmen. Merger may not be a solution. Getting the banks’ money back from the defaulters is the only solution and stricter implementation of the laws.