Invite for Public Meeting
“Crisis in the Banking Sector: Who Stole? Who Pays?”
Date: 23rd February 2018 Venue: Press Club, Time: 6-8 pm.

Punjab National Bank recently detected fraudulent transaction at one of its Mumbai braches worth 11,400 crores. With every passing day, new information is coming out on the various details of this fraud. Just to put understand the scale of the amount – the budgetary allocation for the recapitalisation of the banks was 8139 crore, the budgetary allocation for health is 6045 crore and higher education is 2960 crore. While the details of the scam are available in the media, the debate on accountability seems to be contested. Some argue that this is an isolated incident of one fraudulent officer, some others – the likes of chief economic advisor see it as an opportunity to further push the agenda of privatising public banks.

What about the legal loot?
Even though this is the first scam of this scale, it is definitely not the only one. There have been even in the recent past a few such cases most of which involving big companies with political clout. It is just the staggering amount that has given rise a public debate, but to look at only the frauds would be myopic if we do not consider the legal loot of public money – the write-offs. Just in 2016 -17 alone public sector banks have written-off 81,683 crores worth of bad loans of which PNB alone had written-off 9,205 crores. Further, it is a known fact that 33 percent of the total NPA is caused by big corporates. Hence, these are only different facets of the problem. At the core lies, lack of due diligence towards large corporates. Since 2000 the banking policies have been revised to lend more to big borrowers. The core of the problem lies in the fact that the larger the loan, lesser the security and collateral. Hence it is easier for the big borrowers to get large loans from the banks, without much risk to them. Further, the government and the RBI have recommended the banks to not take actions against such borrowers when they fail to repay but to restructure their loans risking the public money. This cavalier attitude to big business has today plummeted the banking sector into a crisis that it has no way to recover without burdening its depositors.

The officers who have violated the rules and committed fraud has to be punished, but does the responsibility stop there? Despite previous frauds with the Society for worldwide international transactions (SWIFT), RBI has not taken any preventive measure or closer monitoring of the international transactions through SWIFT. Whether it is Vijay Mallya, Nirav Modi or Vikram Kothari or the long list of wilful defaulters or those who received bundles of 2000 rupee currency during demonetisation, or the total amount of deposits received during the demonetisation, there is yet to be proper actions against those involved. Is it then a stretch to assume the collusion or in the least complaisance of the higher authorities, including the inaction of RBI as a regulator?

Way Ahead:
Instead of letting this slide as yet another scam, what is required is stringent actions on not just the bankers involved but also the borrowers who have caused huge loss of public money. But so far, the attitude and the steps were taken by the government and the RBI does not seem to be a step in the right direction.

The monstrous crisis facing the public sector banks today is a result of a series of bad policy decisions that the government and the RBI post liberalisation. First is the decision to lend large loans for longer gestation period without proper security or collateral. The policy of forbearance in the wake of the economic crisis of 2008 and restructuring bad loans till 2014, despite strong opposition from the bank unions and civil society sealed the fate of public sector banks.

The recent RBI dictate to banks asking them to take all the bad loans to National Company Law Tribunal (NCLT) is a decade too late and will only plunge the banks into the further loss. This is because banks need to keep a fifteen percent provisions when it lends loan, but when it has to go to NCLT under the Indian Bankruptcy Code (IBC) the banks are required to keep fifty percent provisions for the loans. Recent reviews of the banks show huge losses after keeping provisions for bad loans, if this increases further, many public sector banks will plunge into a severe loss. Further, so far the recovery rates of the loans in IBC have not been encouraging, in some cases, the banks only got six percent of the total loan.

This is where the Financial Resolution and Deposit Insurance Bill looms large as the final weapon, which proposes to create a Resolution Corporation which can merge, sell and even liquidate financial institutions and can rob the depositors of their saving through the “bail-in” clause.

There is no doubt that the public sector banks are in dire need of capital. But the means adopted to mitigate the loss has been to fleece the public by putting fine on those without a minimum balance, by charging every transaction, limiting or charging for withdrawals above a certain limit. The banks have sold smaller debts to private Asset Reconstruction Companies (ARC) which have bullied and intimidated students and farmers with much smaller loans to forcing them to commit suicide, while the big corporate borrowers face no consequence.

To discuss the many dimensions of the scam and the banking crisis and its consequence on the people of the country we invite you to the public meeting “Crisis in the Banking Sector: Who Stole? Who Pays?” on the 23rd February 2018 in Press Club Lawns between 5 and 8 pm. The meeting will be addressed by Nilotpal Basu CPIM; Ajit Jha, Swaraj India; M K Venu, The Wire; Mohan Guruswamy, Policy Analyst; Sanjay Parikh, Senior Advocate; Vinod Dua, The Wire; Gautam Mody, NTUI; Meera Nangia; Delhi University; Moumita, AIBOC, among others.

Act Now for Harmony & Democracy (ANHAD)
All India Bank Officer’s Confederation (AIBOC)
Centre for Financial Accountability (CFA)
Delhi Solidarity Group (DSG)
National Alliance of People’s Movements (NAPM)
New Trade Union Initiative (NTUI)