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    March 2016

What is bleeding public sector banks?


The Kingfisher Airlines (KFA) fiasco has opened a can of worms in the Indian administrative system. It has once again brought to light the cosy links between corporates and the mighty in the corridors of power which make the industrialists confident of taking the law of the land for granted. 
Beleaguered business tycoon Vijay Mallya is just small fry in the great Indian game of bad loans. There are bigger stressed borrowers around.  Beyond the Kingfisher saga of Rs 9,000-crore debt, a 4,000-job loss and the career of a flamboyant business tycoon, there lies a complex web of policy paralysis, power play and an ugly bureaucracy infested with vested interests. 
Recently, the world woke up to the “spectacular generosity” of the Indian Government which wrote off Rs 1.14 lakh crore bad debts between the financial years 2013 and 2015, a sum eight times more than the annual budget of the Pradhan Mantri Gram Sadak Yojana.  
Why this sorry state of affairs and who is responsible for it? Could it have been possible without help from the Government itself? These are some of the questions that provoke any thinking mind. A logical mind can easily make out that the bad loans were not just the result of bad business decisions but of the bad intent. It is an open secret that businessmen in cahoots with politicians, bankers and bureaucrats have been looting public sector banks for decades. One cannot also deny that policy paralysis, poor management and corruption are the major reasons for making the public sector banks bleed. 
Coming back to Mallya, there is very little chance that the banks will get their money back as the Kingfisher hardly has any asset left. Even if the banks sell Kingfisher assets such as Kingfisher House in Mumbai, the property will fetch only a fraction of what is at stake. 
And this is where the need for a bankruptcy code arises. At present there is no framework in India to deal with corporate insolvency and bankruptcy.  In the case of the Kingfisher, the banks can get their dues only if Mallya pays back from his personal wealth, though the chances of it, as anyone can assume, are dim. As per an industry estimate, the business tycoon has shares worth Rs 7,000 crore in various companies and lot more in fixed assets. 
However, as they say, it is better late than never. Finance Minister Arun Jaitley’s appeal to the Opposition on February 14 to help pass bankruptcy and insolvency laws in Parliament is definitely a positive step towards solving the long pending issue of non-performing assets (NPAs) and wilful defaulters.
The Supreme Court’s recent directive to the Reserve Bank of India to submit a list of big loan defaulters is also a welcome step. It was high time the unscrupulous industrialists were either sent behind bars or compelled to repay their bank loans. It is also time that the bankers are also made accountable for wilful loan defaults. They should answer whether the bad loan crisis is the result of their incompetence or it is collusion. 
But everything said and done, the most vital question still remains. Who will bear the burden of all the assistance to the richest of the rich? And the answer is no rocket science. Of course, it is we, the people of India.


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