‘catch-22’

Source: The Hitavada      Date: 14 Oct 2017 11:36:31

UNION Finance Minister Mr. Arun Jaitley has said in Washington that the Government is working to rebuild capacity of India’s banking sector to tackle what he described as a ‘Catch-22’ situation over the issue of Non-Performing Assets (NPAs). It is not difficult to understand the anxiety of the Finance Minister and the Government particularly over the issue of non-payment of bank dues by seemingly uncountable numbers of people who have sought loans from the banks. So huge is this number that it has become an abiding national concern because the unpaid money can form a mountain bigger than the Himalayas. It is only natural that the Government is duly concerned about this aspect of Indian banking and is trying to rebuild the banks’ capacity to tackle the challenge. 

It is common knowledge that this untenable NPA situation is the outcome of a politically-motivated atmosphere in which the banks were not allowed to work freely in a professional manner for decades on end. Most unfortunately, the political community as well as the Government treated the banks as a milch cow and promoted an absolutely idiotic process of giving loans. In almost no cases were the banks allowed to follow a disciplined and professional path to assess the repaying capacity of the persons or enterprises correctly before disbursement of loans. On many occasions, intense and thoughtless political pressure also came to bear upon the transaction and loans were given under duress though unexpressed.


The banks played their own negative role as well. They realised that the Government was not serious about the loan-repayment process and played the same card further on. Corruption added another dirty dimension to the whole activity and unofficial gratifications made things worse. In many cases where loan money got counted in thousands of crores, insane political pressure made things absolutely difficult for the banks. Subsequent experience showed that in most such cases with political patronage, the parties never bothered about any moral commitment to repayment. Much to the contrary, the people gathered an impression that such loans were taken with an explicit of idea of bunking. Most such parties created fake situations in which repayment did not sound logical. They presented fake excuses and extracted concessions on their own and avoided repayment. This happened in countless thousands of cases under almost every bank.


It was only natural that an unimaginable mountain of NPAs got built up over time. To make matters worse, the unexpected move of demonetisation added to the chaos and havoc. The banks played a dirty role and allowed the situation to go from bad to worse. It is in the period immediately after demonetisation that the fault-lines in India’s banking sector came to the fore menacingly. Bankers let go of all their moral scruples and made unofficial disbursements of exchanged notes to thousands of people. Though the Government put up a brave face, its bewilderment was something everybody knew.


Mr. Jaitley is now talking of tackling such a sector beset with with countless problems that include serious moral and political compromises. The situation is far more serious than what may appear on the surface. It is obvious that the Government will have to ruffle too many feathers in the process of rectification of the ills dogging the banking sector.


In short, the whole thing appeared to be a mili-juli kusti like the WWF bouts and the same blokes are making noises only to sound politically correct. There is every reason to suspect the moral willingness of all the parties to go full distance to make necessary corrections. For, it will call for Himalayan courage.