First Print Issue Dec 2014
Recent Headlines: Jun 19, 2012 : India to provide $10bn for eurozone bailout. 13 Nov 2011 : Manmohan Singh said Kingfisher needs to be bailed out. Its debt was 7700 crore in SBI, ICICI, IDBI and PNB. 23 Nov 2002: Daewoo Motors a korean company, NPA was 500 crore in ICICI, 450 crores in IDBI and 100 crore in EXIM.
According to P Sainath, the revenue foregone in 2013-14 budget can fund three decades of Rural Job Scheme, PDS for four and half years which is 5.32 lakh crore. And when he calculates since 2005-06 it is 36.5 lakh crore which is 36.5 trillion., which can fund MGNREGA for 105 years, PDS for 31 years.
On 25 Nov 2014, RBI governor delivered the third Dr. Verghese Kurien lecture in IRMA where he stressed on the sanctity of the debt contract, where a poor or rich industrialist borrow money with a promise to repay interest and prinicipal according to specified schedule.
He said that 161018 crore has been writen off from bank in last five years. When big business defaults credit becomes costlier and less available, which can increase the overall interest rate for the individual borrower. “An NPA by any other name smells as BAD !”. And ,Large Borrower != Helpless Illiterate peasant and Lender != SAHUKAR but Public sector banks.
The interesting data is that public sector banks give more credit to the poor multi-national company than private sector banks. It is a myth that companies coming to India brings along money, on the other hand, they suck up all the capital from the taxpayers money from PSUs.
Why is that? Banks and RBI are supposed to be vigilant and recover it from the assets of the banks.
Raghuraman also lamented in the lecture that the debt tribunal court set for the recovery are very few and they lack resources. Even after the intervention of supreme court the government does not move. There are thirty-three lower courts and only five higher courts. So even they get order of recovery from the lower one’s the pending cases of higher court makes it hangs on for years and years.
Are public sector banks more liberal than private banks or it is about the relationship between the bank and government ? Is there any proximity among corporates, government and banks ?
Lets leave India, and borrow the dreams of AMERICA and see how the relationship between Banks and government has history in USA. Noni Prins the financial journalist whose book ALL the President’s Bankers: The hidden alliance that drive American Power came out earlier last year points out the role played by bankers in shaping the financial, foreign and domestic policy in the USA in last 100 years. It came out during the time when US inequality is highest and wall street payments were increased 15% to $ 26.7 billion more than double the pay of minimum wage worker in the country.
She highlights how men and banks prospered from recycling petrodollars from Middle east into third world countries, capturing oil revenues and transforming them into high interest rate in Latin America just after great depression. Dumping loans after loans to developing countries caused the debt crisis in third world in 1980s. The first bail out of banks happened in this time in 80s under Reagan and Bush regime. The relationship among wall street, government and war also figures in her book which put ‘Wars as the fastest way to create debt, which creates big profit.’
Bank And War Facts:
JP Morgan purchased control over America's leading newspapers in order to propogandize US public opnion in favor of US entry into World War I.Barclays Bank paid $3.6m to Jews whose assets were seized from French branches of the British-based bank during World War II.Hugo Salinas Price, a multi billionare investor says: What happened to [Libya's] Mr. Gaddafi, many speculate the real reason he was ousted was that he was planning an all-African currency for conducting trade. The same thing happened to him that happened to Saddam because the US doesn’t want any solid competing currency out there vs the dollar. (Gadaffi was talking about gold dinar)
The regulatories bodies in India like CAG, TRAI, RBI must stand stronger against the nexus between corporates, bank and government. Their recommendations and report can get a push from civil society organisation. The reports from these bodies are usually less higlighted by media. The recent example is Khullar committee report, which questiones the cross media ownership in media itself. Most of the corporate media made it a attack on media and asked TRAI to mind its own business. The UPA government did not go ahead with fear of general election approaching and earning the ire of media.
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