The other side of the PNB fraud

For 96-year-old Ramdiya from Kaithal in Haryana, an old age pension of Rs 1,600 he receives every month is his only social security. But for several months now, he is being deprived of his only lifeline at this advanced age. To recover a loan of Rs 50,000 he had taken way back in 2006, the bank has been mercilessly deducting the entire amount from his old age pension that is routed through his bank account. 

Ramdiya is not the only beneficiary of the old age pension scheme whose only lifeline has been suddenly snapped. This is against the banking norms but then that’s the extent of cruelty that the poor and the marginalised sections of the society are subjected to by the banking system. Banks are known to paste the name and photo of the defaulting farmers on notice boards in the tehsil headquarters; recovery agents not only harass but also physically thrash the defaulters; inability to pay back the loans invariably results in seizure of movable and immovable property which is put to auction. I wonder why the same privileges are denied to the corporate defaulters after all both the farmers, as well as the industrialists, draw loans from the nationalised banks. Why then different strokes for different class of defaulters?    

The relative ease, with which corporate defaulters have been able to defraud banks, adding on to the piling up of non-performing assets (NPAS) and still getting away without even an idea of remorse, clearly shows how the entire banking system has been structured to serve only the rich and powerful. After all, if Rs 11,400-crore has been fraudulently sucked out of Punjab National Bank (PNB) by Nirav Modi and his associates, and they have very conveniently escaped to safer havens to escape arrests it clearly shows that the fear of banking regulator is only for the aam aadmi. While all kinds of inhuman ways are applied to recover dues from farmers, some recovery tactics even surpassing barbaric norms, the same banks have always refrained from even making the names of corporate defaulter’s public. The Finance Ministry, as well as the RBI, have time and again pleaded before the Supreme Court not to disclose the names of wilful defaulters saying it will reduce investor’s confidence. 

With tacit protection being accorded by the Finance Ministry, no wonder the banks are now saddled with NPAs amounting to a staggering Rs 9.5 lakh crores. On the other hand, the total outstanding farm loan as of Sept 2016 stood at Rs 12.6 lakh crore. But when the farmers demand the outstanding debt to be written-off the mainline economists and policymakers are quick to react saying that it leads to a moral hazard and will upset the national balance sheet. On the other hand, writing-off corporate bad loans is viewed as economic growth, as the chief economic advisor had once remarked. Even the economic policies, therefore, provide an escape route for corporate defaulters. They know for sure that their bad debts will be easily written-off in the process to attain economic growth.    

Earlier, the Public Accounts Committee of Parliament had estimated that the total outstanding loans of public sector banks till mar 2017 stood at Rs 6.8-lakh crores.  Out of this, 70 per cent belongs to the corporate sector, whereas only 1 per cent of the defaulters are farmers.  Already, in the past 10 years, Rs 3.60 lakh crore of bad debts have been written off by banks. But what I fail to understand is why none of the corporate chiefs whose companies have defaulted on bank loans have been put through the same strenuous scrutiny and made to undergo the same level of inhuman recovery tactics that farmers are forced to. 

In fact, while defaulting farmers are routinely put in jail and are made to pay upfront for jail expenses, company heads escape with huge ‘haircuts’. For instance, Sree Metaliks company owed Rs 13,000-crore out of which only 7 per cent was recovered under insolvency resolution process. A Haryana farmer, who had borrowed Rs 6-lakh for laying irrigation pipeline in his crop fields, on the other hand, was sentenced to two years imprisonment by a district court a few weeks back and also ordered to deposit Rs 9.80 lakh. 

If Rs 11,400-crore that Nirav Modi has duped the banks was to be used for farm loan waiver of up to Rs 1.5-lakh per farmer, my estimate is that it could benefit as many as 30-lakh farmers. My estimate is based on Maharashtra government’s claim that its proposed Rs 34,000-crore loan waiver will benefit 89 lakh farmers. A third of Rs 34,000 crore is what Nirav Modi has defrauded the banks with, and using Maharashtra’s calculations, Rs 11,400-crore could have wiped-off bad loans of 30-lakh farmers. Add to this Rs 3,695-crore ‘default’ by Rotomac chief, and another Rs 9,000-crore that Vijay Mallaya ran away with, another set of 30 lakh farmers could have emerged free from the burden of bad loans they carry. In simple words, the massive swindle of public exchequer inflicted by just three captains of Indian industry could have wiped away the tears of over 60 lakh farmers reeling under farm indebtedness. 

The author is an agricultural policy analyst. Views expressed are personal