Prime Minister Narendra Modi acted wisely and used the sword to coerce and convince businessmen to repay; that was the only sane way; a profligate businessman Anil Ambani, for example, will be sufficiently chastised now
When he was meeting businessmen and world leaders in suit boots, and being derisively mocked, ridiculed, and abused by sundry political crooks, scoundrels, learned ex-bankers, Harvard educated lawyers, he was working for the poor and the damned and duped Indians of all hues and cries. He was busy saving our economy, nearly bankrupt banks, ‘aam’ investors’ wealth, precious jobs, and the nation. He succeeded in his mission in spite of the countless hurdles put in the way by the carefully planted stooges of the previous regime in various ministries, the media and the judicial establishment.
In 2003 Vajpayee had cleaned up the system and paid a huge political price for it. He freed the UTI and other financial institutions from the slavery of the ruling political establishment. As soon as UPA came to power, Sonia and her cabal of crooks were back to old scamming ways that finally led to a royal mess in the banking and financial sector.
I’m surprised that in this ugly imbroglio none is taking the name of the ex-PM and ex-RBI governor Man Mohan Singh. Didn’t he know what was wrong with banks and how his Finance Minister was manipulating the government-controlled financial institutions to benefit fraudsters, scammers, and his cronies? Of course, he knew. He was the one who had been performing the hatchet job and gaming the financial system for the dynasty and its buddies for decades.
In 2006, Gitanjali Gems had an outstanding loan in their books of 700 crore that rose to 8400 crore in 2014 and stayed at that level in 2017. In almost the same time frame Jaiprakash Associates had an outstanding loan of 8,000 crore in 2007 that rose to 75,000 crore in 2015 and as the Modi Government took stock of the massive NPA problem and began putting in place checks and balances, Jaiprakash Associates sold off their businesses, reduced their footprint and the loan stood at 39,000 crore by 2017.
That’s a recovery of 36,000 crores within two years. Vijay Mallya owes banks 9000 crore (against which banks already have United Breweries (UB) shares worth 9000 crore), the recovery from Jaiprakash Associates case alone is four times of that according to Bagree.
This is how you recover dues of thousands of crore, silently and without creating media hype and talking too much about it. Suppose Jaiprakash Associates issue was treated as a scam and its owner Jaiprakash Gaur and his sons and relatives were arrested, you would have got nothing back. His debtors would have vanished, and market cap would have turned zero. He would have lost the capacity to raise funds to repay the lending banks. Let us also suppose that in the wake of Vijay Mallya’s fraud, with the prima facie complicity of UPA’s big bosses and SBI head honchos, UB was shut down. It shares worth 9000 crore would have been worth zilch. You don’t recover dues by shutting down a running establishment and stripping it of all its financial leverages to raise funds.
I’m talking about the ground reality and how do you recover money from a business that has gone down for whatever reasons and has run huge debts. If you begin investigating into Jaypee or even Tata group financials you will find some elements of ‘fraudulent’ activity. All businessmen use a network of contacts and by leveraging their small capital and goodwill they raise huge funds and expand their footprint and indulge in either productive and profitable or profligate and risky behaviour. That’s how economy expands or collapses. They manage their balance sheets in all sorts of creative ways to look good on paper.
Now, you shut any business, and see what happens. Do you think bankers have not indulged in frauds? Why don’t we shut SBI? Do you think LIC has not indulged in frauds by buying into Gili shares and other dead stocks at the behest of MMS and Chidambaram? Why don’t we shut LIC then? The reality is that a jailed businessman solves no problem and the smartest thing to deal with such crisis is to play it cool, use soft coercive measures, and the threat of law, and gradually extract your money.
Shutting a running establishment that employs thousands must be the last resort. Once a business is shut, the chances of loan recovery, even if the loan is acquired fraudulently, become Nil. I bet Nirav Modi had debtors in his business too who may be owing him a few thousand crores. He cannot recover that money anymore even if he wants to make good the loss. All his market cap is zero today. He has nothing left to leverage to raise funds to repay his debt unless of course, he owns a few very productive diamond mines in Africa bought out of the money siphoned off from PNB.
Loan recovery is a delicate balancing act. You can use the sword of law to coerce businessmen. You kill them with that sword and you get nothing. That’s the nature of any business, small or big. When you kill a terrorist, you just have a dead body. Catch him alive and you can mine him for important data on terror.
NaMo acted wisely and used the sword to coerce and convince businessmen to repay. That was the only sane way. I’m certain a profligate businessman like Anil Ambani will be sufficiently chastised now. He wasted nearly 5000 crore in his Entertainment business. Any fool could see he was throwing the money down the drain when he funded Speilberg’s DreamWorks guided by his Hollywood smitten advisors. Thanks to his big brother and his cash-rich discom, he is paying back the money he squandered. I’m sure the Gaurs of Jaiprakash Associates will now run their core cement business far more carefully without getting too ambitious and adventurous.
That’s why I am repeatedly saying there must be the delicate handling of these issues. You cannot run roughshod over everything. It’s like dealing with a case of incest or child rape within a family. It requires very careful and mature handling.
The opposition may like Adani, Ambani, Tata, Birla, and all other industrialists and bankers to be sent behind bars for their outstanding loans. Why do you think Kejriwal, Prashant Bhushan, and the leftist and anarchist brigade clamour for the heads of Indian industrialists? They want India to fail and collapse. They want Indian economy to go bust. Obviously, some of us who, in the past week, have been busy creating and forwarding sardonic social media memes either don’t have an inkling of how businesses and banks operate or have abandoned our sense of balance and responsibility and are unwittingly contributing to highly damaging and destructive negative market sentiments.
And however sycophantic it may sound, unperturbed and undeterred by all this, Narendra Modi, acted like Neelkanth. He drank the venom and kept his cool and refused to indulge in the blame game. He acted with patience and sagacity and even placated the political crooks to get important legislation passed. His timely demonetization move, PMJDY kind of initiatives, and other corrective policy and legislative measures saved our banking system that was on the verge of complete collapse.
I also have a sincere and humble advice for Narendra Modi. When crooked and corrupt politicians are punished, the mood of the people, nation and markets invariably gets positive. He does not have to prompt the investigating agencies to go after a particular individual. He has to do what he did in J&K, freed the security forces to do the needful. He will be within his rights and bounds of propriety to openly tell ED, CBI, and other investigating and prosecuting agencies to form a team of quick-footed and quick-witted smart officers to hasten investigations into cases of corruption to nail the sleazy crooks.