Ever since Jawaharlal Nehru was reported as asking bankers to “give a little bit of help” to Jayanti Dharma Teja, politicians have ensured that a huge amount of bank funds go to entrepreneurs who have no intention of ever repaying the banks that have been arm-twisted into giving such loans. Indira Gandhi threw open the doors to this sort of misuse by nationalising large private banks, thereby gaining control over their funds. Since then, hundreds of thousands of crores of rupees have ended up in the foreign bank accounts of unscrupulous businessmen and their political patrons, in the process creating a severe crisis in the banking system. While his policy of ultra-high interest rates does nothing to bring down inflation even as it boosts the cost of borrowing, and thereby slows down the growth of industry and services upon which job creation depends, Reserve Bank of India Governor Raghuram Rajan has done well in highlighting the lack of ethics, indeed the crass selfishness of massive amounts of bank loans going bad even while the promoters of companies enjoy the high life. The public expects Prime Minister Narendra Modi to ensure that those depredators who have looted banks for decades be brought to justice. The scams involved are many, but except for a tiny number of individuals, as yet accountability has been lacking for such crimes. The misdeeds that are financial ought to have punishments that are of the same nature, which means that the assets of those responsible for not repaying banks need to be taken over by the banks, so as to ensure that the taxpayer not pick up the tab for the dishonest actions of a handful of billionaire wrongdoers.
It is unfortunate that several of the well-connected have escaped responsibility for their actions. An example relates to defaulters in an exchange, which, in effect, was shut down by the Ministry of Finance in a move that helped a competitor with close business and personal links to powerful individuals. All wrongdoing needs to be punished, but by the prosecution of individuals, and not the carefully scripted destruction of a rival enterprise generating income and employment. Yet in precisely such a move, officials allowed every defaulter in the doomed exchange to escape. Instead, these officials sought to transfer the entire financial burden of individual wrongdoing onto a corporate entity, clearly with the intention of allowing looters to keep their proceeds and shut down another rival to businesses close to the powerful. That stringent action was taken against the founder of the exchange in question is welcome. But thereafter, instead of continuing with such necessary action, why was every defaulter in the doomed exchange given a free pass by the Ministry of Finance, SEBI and other agencies? Such leniency towards serial defaulters clearly involves officials at senior levels, who need to be called to account for the criminal lapse of permitting proven defaulters to get away without repaying a paisa of the moneys looted by them from innocent investors.
Similar steps needs to be taken in the case of repeated nationalised bank loans still being given to entities with a history of defaulting on their obligations. Apart from just making statements, RBI Governor Raghuram Rajan should make public details of those who have swindled public sector banks of billions of dollars and call for them to either return the money or face prosecution. PM Modi, whose call for clean and transparent government we support, needs to intervene to cleanse the financial stables of mega scamsters and the corrupt officials who have helped them escape justice and continue their career of looting public funds.