Some five years ago, India’s big banks decided that they had to do something about bad loans. The habit of borrowing money and not returning it was becoming an epidemic. The strategy they came up with was simple: Name and shame. Some banks hired small music-playing bands to visit the homes of the offending parties, stand outside on the road and create as much noise as possible (the bands weren’t really musical, but they made up for that with very loud drumming). In a matter of minutes the whole neighbourhood got to know about the defaulters in their midst.
Other banks adopted quieter, but perhaps even more telling methods: They printed ads in newspapers with names and photographs of people who hadn’t paid back their loans. According to one report, the State Bank of India in August 2011 had a picture of a woman who had taken a loan of Rs 80,000 of which over Rs 50,000 was outstanding. Corporation Bank put defaulters’ photographs on hoardings — generally of small businessmen who were doing badly and had fallen behind on their loan repayments. (Very few of these, incidentally, had been declared “wilful defaulters”.)
The logical line of questioning this strategy leads to is this: If the lady whose outstanding amount to SBI of Rs 50,000 gets her name and picture in newspaper ads, how many ads should feature Vijay Mallya, who owes SBI Rs 1,600 crore (an amount whose full impact is better felt in figures — Rs 1600,00,00,000)? Similarly, if Corporation Bank uses hoardings to shame small businessmen who owe it money, how many hoardings should it paint with Mr Mallya’s photographs when he owes it Rs 3,10,00,00,000?
Double standards? You bet. And those double standards continue till today. Mr Mallya, whose usual boast had been that his was bigger than everyone else’s: A bigger yacht, bigger houses, bigger collection of horses, bigger private jet etc., etc., is now reduced to crying, “Why is the media after me? My debt is not bigger than others’!” He is quite right there. Public sector banks have as many as 44 entities owing more than Rs 5,000 crore each, 39 of them with SBI alone. The total non-performing assets (NPAs) of public sector banks now stand at a staggering Rs 3,41,641 crore (September 2015 figure), which is 1.5 times their market value!
The double standards come in here: We know the identity of the woman who owes Rs 50,000, but not of the people or companies whose bad debts total up to thousands of crores! RTI applications have tried to get the names of these defaulters and the Central Information Commissioner also upheld the principle of “outing” major defaulters, but the Reserve Bank of India intervened and went in appeal to the courts citing the bankers’ obligation to maintain confidentiality. This was four years ago; even today, when the Supreme Court has intervened and asked for a list of major defaulters, the Reserve Bank has given it reluctantly and as a confidential document, not to be made public because making it public would be against “business interests”.
I am not a finance man, and I am sure there is a basic flaw in my thinking which is based purely on common sense. This tells me that if you need to preserve confidentiality for the “Big Boys”, you need to equally preserve confidentiality for the “Little Woman”. Or, in reverse, if you need to name and shame the “Little Woman”, you need to name and shame the “Big Boys” too.
Look at what this need for confidentiality does. Mr Mallya — who, let us emphasise once again, is not the biggest defaulter, only the most visible one — owes a total of Rs 6,890 crore to banks. This sum he owes to a total of 17 banks, ranging from Rs 50 crore to J&K Bank to Rs 1,600 crore to SBI. The confidentiality clause would enable him to do a kind of financial jugglery: Bank A does not know what Mr Mallya has borrowed from Bank B and vice versa, and neither of them know what he has borrowed from Banks C, D, E and so on, using most letters of the alphabet, so each one lends him money. Are there disclosure norms to tell Bank A what he has borrowed from Bank B? If not, why not? If so, were they falsified? If falsified, isn’t that actionable? If not falsified, were all the bank officials happy to overlook these disclosures?
Incidentally, the double standards extend in so many other ways. For example, if you take a loan against your apartment, the bank will never value it according to market rates, but at a lesser figure. On the other hand, when Mr Mallya gives Kingfisher House as surety, the bank accepts it at a value more than three times its market value! That’s one reason why there was not a single bidder when the building was put up for auction recently.
In this, and in other instances, there has been obvious connivance between the company and bank officials, and that’s something which needs investigation, particularly considering most of Mr Mallya’s borrowings were from public sector banks. (Private banks are in all sorts of trouble too because of massive bad loans, but that’s another story.)
Questions should also be asked in the sorry tale of Diageo, the international spirits company, for paying Mr Mallya Rs 515 crore to relinquish the chairmanship of United Spirits Ltd which Diageo had taken over, and to sign a non-competing clause. Was an international major so scared of a man who is in such disgrace that no one will lend him a penny now? That’s not all — Indian banks woke up to this payment so late that the money had already been paid to
Mr Mallya, otherwise they could have got hold of it to reduce their debts. Does Kingfisher make sleeping pills too? Who is going to stand up for Mr Mallya now? The heavyweight politicians who leaned on public sector banks to lend him money when it was clearly a bad bet? The media which made him a larger-than-life figure, dazzled by his “world’s biggest yacht”, his stable of 200 horses, his collection of 250 vintage cars, his massive birthday parties? If Mr Mallya’s rise and fall is a kind of morality tale, he is not the only one to blame. There are very many villains in this story. They differ from each other only in scale.
