It has been two and a half years since liquor king Vijay Mallya escaped from the country after allegedly defrauding banks and defaulting loans worth at least Rs 9,000 crore. In fact, Mallya's loan became an NPA (non-performing asset) way back in 2011-12, which means even after six years of loan default and alleged fraud, he is still roaming free beyond the reach of the banks.
Mallya left India on 2 March 2016 just in time before a clutch of banks moved the Supreme Court seeking his detention.
Nirav Modi, another high profile loan defaulter and alleged fraudster, left India in the first week of January 2018 after digging a big hole (Rs 14,000 cr) in the books of the Punjab National Bank (PNB) by orchestrating a fraud. So did Mehul Choksi, Modi's uncle whom the investigators described as one of the masterminds of the PNB scam.
In all these cases, banks haven't made any significant progress in laying their hands on the alleged offenders nor in making a meaningful recovery of the money. In other words, all the high profile offenders are still having a free run and they continue to mock the banks, dragging them from courtrooms to courtrooms, fielding top lawyers and using their public relations machinery to manage public perception.
Now, just for a moment, imagine what would have the same banks done if it is a common man--a salaried or self-employed--who defaulted a few EMIs on a few lakhs of rupee loan. The recovery agents of the banks would be at his/her doorstep in no time. Then begins the process of harassing, name shaming and even threatening legal action to drag the defaulter through courtrooms and get his/her assets liquidated to recover the money.
There are several cases where the defaulter, with his property and social stature at stake, resorts to end his life.
Last month, there was a report of a debt-ridden farmer dying in prison after he got arrested in a cheque bounce case.
Farmer arrested within 5 hours
Yesterday (Thursday), industrialist Harsh Goenka tweeted the story of Keshav Singh, a farmer from Haryana who got arrested in five hours on the orders of a bank tribunal for defaulting on an EMI on his Rs 1.2 lakh tractor loan.
Singh suffered losses following a season of scanty rains. Yet the bank tribunal ordered his arrest, says Goenka's tweet.
Keshav singh, farmer in Haryana took a loan of Rs 1.2 lac to buy a tractor. Rain failed & he lost his crop. Unable to pay the EMI, bank tribunal ordered arrest. Cops arrested him in 5 hours. But Mallya, Nirav Modi, so many Corporate defaulters, nothing happens. Is that justice?
" Harsh Goenka (@hvgoenka) October 11, 2018
This writer couldn't independently verify Keshav Singh's story. But assuming this is correct, how could banks put Singh behind bars in a matter of hours for a loan default that isn't wilful in nature? Because, Singh, unlike the Mallyas and Modis, didn't have the money power to hire lawyers or pay back atleast part of the money he owed to banks; forget about calling a press conference or issuing a media statement to explain his plight and the reasons for crop loss.
Indian banks, by now, are known for their superior inefficiency (one of the reasons that has led to the present banking crisis) and loose lending practices, have evidently two sets of rules when it comes to customer fairness.
The rule varies depending on how deep is the pocket of the client and how influential he is in political circles. This isn't only about recovery of the money. But also about processing of loans. Here again, the approach of the banks are starkly different depending on whether the customer is a moneybag or an aam aadmi. To understand this, let's revisit the tale of two types of bank counters Indian banks run, which are:
The aam aadmi counter
You belong to the salaried class, struggling to make both ends meet. You need a personal loan and walk into the branch of any nationalised bank. That's where you find the first type of bank counters in the great Indian banking circus. Let's call it the bank counter for the common man or, let's say, the aam aadmi counter. Here, you have to produce a number of documents that prove your identity, address, income, bank transaction records for at least half a year, employer details and evidence that shows the submissions are original.
Try playing around with any of the above-mentioned documents, with a small change here and there, and you will be pulled up in no time and will be questioned, harassed, publicly insulted and your record will be forwarded to credit bureaus and investigators depending upon the degree of manipulation, so that others -- particularly other bankers -- are alerted about the potential danger you pose to them, helping them up their guard against a potential fraudster " that is you.
Normally, billionaires holding a small piece of the country as their personal asset, walk into this counter. Typically, loan requests are Rs 500 crore and above. This category of customer is not used to thousands, tens of thousands or lakhs. They borrow in hundreds and thousands of crores. Here, the rules are different altogether. The scrutiny explained above, at the aam aadmi counter, is not applicable here. All the nationally acknowledged and respected fraudsters walk into this counter and collude with the first vulnerable banker they come across and begin the scientific process of defrauding the bank step-by-step.
Here, there is no particular scrutiny of assets, i.e. collateral that is pledged against the loan, no verification of the financial details of the moneybag and his company/ies, no mechanism to verify the end-use of the money or even whether the documents submitted are a work of fiction or not.
While speaking on corporate loan defaults, bankers typically defend their positions citing weak industry environment that has impacted the cash flows of the borrower and the need to assist him in times of crisis and equip industrialists for nation-building. The question here is, doesn't the same rule apply to common borrowers, especially farmers who default on a loan following a crop failure? What is the rationale in taking a soft approach to the defaulting industrialist while hunting down the poor borrowers?
According to the provisional data by the National Crime Records Bureau, around 11,370 farmers (including agricultural labourers) have committed suicide in 2016 for reasons ranging from crop losses to financial difficulties.
The RBI devotes a lot of space in its circulars to explain to banks on fair practices to customers. There is nothing wrong in banks chasing a defaulter to recover money. But why run two counters-- one for the rich and the other for the poor?