Thomas Franco

Random Reflections
Addressing a Rozgar Mela last month and virtually handing over 70,000 appointment letters (remember the 2 crore jobs per year promise and the vacant 9, 60,000 posts in the union government itself) the prime minister was in his usual gloating style. “UPA alliance government destroyed the banking sector with scams, while my government has restored its financial health… Phone banking where loans are disbursed on the phone calls from powerful men has stopped,” he bragged. His other claims were strengthening the management in government Banks; imbibing professionalism and consolidation of small banks into large banks.

He further added that 99% of the deposits have become safe. While the wealth of those who looted the banks is attached. He congratulated the bank employees for their good work and hailed the opening of 50 crore Jan Dhan Accounts. His bragging also included saving 1.5 crore jobs by providing loans to small enterprises and PM SVANidhi scheme.

I don’t know who writes his speeches but having worked in the public sector for 38 years and leading the Officers Association at the State Bank level as well as the industry level and also writing on the banking sector for the last 5 years, I would like to provide a reality check.

Scams in India.

  1. Vijay Malaya who owed Rs.10000 crores left the country in 2016. The FM promised that he will be brought back. Why hasn’t it happened yet, despite their claims of having a good relationship with the UK?
  2. Didn’t the 11400 crore loot, The Nirav Modi, Meher Chokshi and PNB scam, happen during Mr. Modi’s tenure? What action has been taken so far?
  3. Jatin Mehta of Winsome Diamonds left the country in 2014 when he owed Rs. 7000 crores to banks here. He and his family are still abroad, living in style and pomp. Newspapers reported that he is close to Mr. Gautam Adani.
  4. Rishi Kamlesh Agarwal of ABG shipyard has cheated the banks to the tune of Rs. 22842 crore and the fraud was reported in 2019 but nothing substantial has happened.
  5. Kanish Gold Pvt. Ltd cheated banks to the tune of Rs. 824 crores in 2017.
  6. Gujarat based Sterling Biotech Ltd. defrauded the Andhra Bank lead consortium of Rs. 8100 crores in 2017.
  7. Vikram Kothari of Rotomac pen had an outstanding of Rs. 2919 cr. when he was arrested for fraud in 2018. He got bail on health grounds, and he is no more. The fraud was reported in 2015.
  8. In the Videocon fraud, ICICI had loaned the company Rs. 3250 Cr and the CEO of ICICI Bank Chanda Kochar was involved. Till the fraud came to light, she was accompanying the group which travelled with the PM on his foreign trips.
  9. The RP Info system fraud came to light in 2018 and the amount involved is Rs. 515.15 crores.
  10. In the Aircel fraud which came to light in 2018; its founder C. Sivasankaran has defrauded IDBI alone for Rs. 600 crores and is living abroad happily.

The RBI report of 2023 has reported that in 2020–21 there were 7338 frauds amounting to Rs. 132389 cr and in 2021–22 it was 9097 and Rs. 59819 cr. In 2022–23, the highest ever 13,530 frauds were reported, amounting to Rs. 30252 crores. Does all this show the financial health of banks, or is it the opposite?

‘Phone’ Banking
If powerful people were making phone calls for loans which were not repaid eventually, has any action been taken against the phone dialling netas as well as the bankers? By repeating a lie many times, he is trying to make people believe it as truth. During my long tenure in the banking sector, I have never come across such incidents and no bank officer ever shared such an experience.
It is during this government that the 59-minute loans were introduced and an unknown company from Gujarat, which had a major role in running the project, made huge money. But no banker ever gave any loan in 59 minutes. Bankers always follow the laid down procedures, or they know that they will get punished.

Banks Boards with professionalism
Six of the 11 banks don’t have the non-executive Chairman, reported the Wire on June 22, 2023 (SBI has no such post). Over one-third of PSB directors’ posts – 64 numbers- are vacant reported Newsclick on 12th January 23. The RBI governor has recently said the quality of
directors is not up to the mark. Since 2014 none of the 12 banks have employee and officer directors which are mandated by law. This is in spite of a Delhi high court directive in 2017 to the union government. Is this professionalism, Modiji?

Merger of Banks

From 28 public sector banks earlier, now we have only 12. We were told that we will have a few global banks. Not even SBI, our largest bank, is ranked within the top 20 banks. It is the 41st largest bank in terms of total assets and ranked 221 in the fortune global list. Merger has led to a reduction in Bank branches and staff strength, leading to poor service. In no way, it has helped the banking system. In fact, India needs more public banks, a tripling of bank employees’ strength and five times more small loans.

Deposit insurance
Guarantee to deposits only up to Rs. 5 lakh is one of the lowest in the world. The annual report of RBI 2023 says that only 46.3% of the deposits are protected. 54% of the deposit amount is not protected as these deposits are above Rs. 5 lakhs. The speechwriter should do fact-checking more carefully.

Jan Dhan Accounts

When 10 crore Jan Dhan accounts were opened, the government claimed that 99% of the Indians have bank accounts. Then it soared up to around 50 crores. So who are these additional 40 crore account holders? The banks have reported every new account as Jan dhan account, even if the account holder already had another account, just to please the government. And due to minimum balance charges, crores of accounts have been closed. RBI should collect this data and share the reality with the people.

Have we recovered the loot?
As said in the beginning, the biggest looters are abroad and we could do nothing. In the last 10 years, we have written off Rs. 15 lakh crores to clean the balance sheets. Whose money is this? The National Company Law Tribunal settles more haircuts (write-offs) than recovery, as commented by Parliamentary Standing Committee on Finance. The NPAs will accumulate further. More write-offs will take place. It is a cycle and there is no real effort to end it.

Appreciation to Bankers
Well. They have done so well, even when they don’t agree with Modi’s vision. One example is demonetisation which was a cruel joke on black money, but the bankers did all the hard work. Bankers who lost their lives were not given any special compensation. Their demand for a 5-day week has been pending for years. The revamp of pension was announced by the finance minister herself two years back. Still, committee after committee are looking into it. Bankers are getting lesser salaries and pensions when compared with union government servants. Will the prime minister intervene?

Loans to MSMES and the MUDRA schemes.
Modi himself has claimed that only 1.5 crore jobs alone have been saved. From demonetisation to GST, many more crores of people have lost their jobs in the MSME sector. Lots of entrepreneurs have become workers. MSMEs which provide the largest employment are in crisis as only large Corporates are favoured by the government. 43 crore MUDRA loans have been given, amounting to Rs.23 lakh crores. The repayment is poor because we don’t have a flourishing economy to support them. They are going to be a huge problem soon as NPAs will increase.

Under this scheme, a loan of Rs. 10,000 is given to a street vendor. It’s not adequate. The vendors spend half of the money on getting street vendor certificates. And no private bank provides street vendors loans.

The banks will be under serious trouble soon because of the amounts they have written off and the mounting NPAs. As a way out, the RBI is now promoting compromise proposals for fraudsters and wilful defaulters. It will not be a surprise to see Mallya, Meher Choksi, Jatin Mehta and others returning to India with a red carpet welcome. They have reduced the deposit interest for the common man to write off corporate loans. 599 corporates with loans above 100 crore rupees get loan at less than 5%. A poor education loan borrower pays 11-12%. So are the MSME borrowers! 30% of the bank loans have been shifted to non-banking finance companies which get loans from banks at 10-11% and lend at rates up to 36%. Now even this ceiling has been lifted!

The crisis is awaiting. The Financial Resolution and Deposit Insurance Bill 2017 was withdrawn due to pressure from the people. While withdrawing it, it was stated in the Parliament that it will be brought back at an appropriate time. Could it happen after the next elections if they win?

The present ‘good health’ of the banks is temporary, and it is likely to deteriorate. The government has not implemented the RBI norm of having a ceiling for big loans which is Rs. 10000 crore to one corporate.
Soon, Adani’s loans are likely to become NPAs if the banks stop evergreening. Sadly, the government still talks of the privatization of Banks. Privatization will lead to further inequality.

Had the Rs. 15,31,453 crore which was written off as bad debt used for doubling the deposit interest rates, the household depositors who are the largest chunk of depositors would have benefited. The small borrowers, farmers, students, women Self Help Groups and MSMEs could have been given more loans at 5% interest. The service charges for small depositors and borrowers could have been waived. The bank employee’s strength and rural bank branches could have been increased. The employees could have been paid better.

Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.

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