by Harish Gupta, National Editor, Lokmat Group
CAUTION, CHOWKIDAR IS ASLEEP
So, with the Nirav Modi (NiMo) and Mehul Choksi scam hitting Rs 11,400, and still counting, the country seems to have doggedly refused to stray from its path of letting the financial systems open 24X7 for plunder. It might have begun with the Nagarwala case in the high noon of the early Indira Gandhi era. It could have evolved into the Harshad Mehta (early 1990’s) and Ketan Parekh (early 2000’s) saga, in which the two worthies in effect looted banks to fuel stock prices to dizzy heights. And, with the financial system being the platform on which the corporate system rests, the systemic destruction was in public view in 2009, with the brazen fiddling by B. Ramalinga Raju and associates of profit and loss figures of the erstwhile Satyam Computers, in cahoots with PriceWater house Coopers, the world famous auditors.
In fact that was a major reason why voters thought they’d had enough of it, gave an almighty shove to the Congress-led government,and welcomed a regime led by one who proudly promised : na khaunga na khane dunga(“neither will I steal nor will let others steal”) and will be your Chowkidar (Guard) for 24X7.
However, the two diamond traders’ recent escapades, in obvious collusion with a gaggle of officials of Punjab National Bank and their unknown patrons, has turned Prime Minister Narendra Modi’s much-quoted pre-2014 assurance into a bizarre mockery. And the dimension of the theft too is poised to leapfrog over time, as more claims accumulate with PNB due to the fraudulent Letters of Undertaking (LoU) issued to banks abroad in favour of the ‘diamond duo’. Till last year, the duo could easily float below radar as they had a key ‘friend’, Gokul nath Shetty, PNB's Deputy Manager, who had enabled them to “roll over” the credits after the termination of the statutory 90-day period. The trick of the trade lay in circulating the LoU over SWIFT, the secure telecom network that connects banks the world over, without informing the bank’s own Core Banking Solutions (CBS). It is like your partner withdrawing cash from a joint account without informing you.
Or something even more serious! Because the rogue partner can cheat you only to the extent of your own net worth. But a PSU bank is owned by none other than the President of India. No government so far has agreed to bring its stake down to below 50 per cent. So it remains a ‘sovereign risk’ which, if left unchecked, has the potential to recoil on the exchequer.
The question is: why did a government wedded to the promise of “na khane dunga” look the other way when NiMo’s companies were splurging on unexplained and undeclared bank credit for over seven years? How did Shetty continue in the forex department of PNB despite a Central Vigilance Commission rule that the incumbent in sensitive post should be transferred after three years? Why Shetty's three transfer orders were canceled? What were the bank’s army of external auditors doing? And where were RBI’s team of hundreds of inspectors who have the powers to inspect any branch, anytime and any account ? Why was the Modi administration so oblivious of daylight robbery in its own banks?
Well, it can be attributed to the typical Indian lethargy to fight corruption. But there is yet another explanation why Nirav Modi's shenanigans went unnoticed under the NDA for almost four years. How will the ‘bigger Modi’ assuage his critics who point at his group photo with the ‘little M’ at the WEF conclave in Davos, taken days after the CBI had filed an FIR against the businessman? Besides, Nirav Modi is the brother of Nishal, who is son-in-law of the Salgaokar family of Goa, closely related to the Ambanis, the country’s richest clan. The CFO of Nirav’s holding company being grilled by CBI is nephew of the late Dhirubhai Ambani, the Reliance founder.
In the past, the likes of Harshad Mehta and Ketan Parekh defrauded the nationalised banks and played havoc in the share market because of systemic inadequacies. Some of these flaws were indeed fixed, which is why the capital market today is fully screen-based, with adequate disclosure norms in place. The corruption-prone badla system was replaced by a mature derivatives market. But the banking sector remained largely untouched, except that Raghuram Rajan, as RBI Governor, initiated the diagnostic steps. These showed how deep the rot had gone. The bad loans of public sector banks were 4.4 per cent in March 2014 against 2.09 per cent in 2008-09. After the change in government, as Rajan was forcing the banks to own up their losses and today the figure of NPA is over 14%. Rajan didn't have a cordial relationship with the Modi government is too well known. He went, and even the disclosures stopped. Choking under bad loans, the PSU banks began putting squeeze on total advances last year, for the first time in two decades. The banking sector’s bad loans, together with loans being rolled over and under restructuring, have hit a dizzying Rs 10 lakh crore, which is 3X the country’s tax revenues. If one looks at only PNB, its NPA has shot up three times between 2014 and 2016, from Rs 18,800 crore to Rs 55,818 crore. And roll overs are tubmling out of the closet of one bank after the other.
It is clear that somewhere someone is involved and guilty of connivance, ignorance or humungous lapse. Narendra Modi handles all appointments, transfers, postings in government & banks. He reads every complaint and mail sent to him and responds as well. His Man Ki Baat is a testimony to his actions. He gave a dressing down to the jewelers at a huge conference in 2015 and imposed taxes on them which no PM could dare in the past. But did he measure up to the job of chowkidar (sentry) when it came to guarding banks' coffers ? Pollsters say his ratings remain high. But as another election draws near, the chinks in Modi's armory are clearly showing.
(The author is National Editor, Lokmat group)
