Don’t tar all PSU bankers with the same brush

This is a joke. In September 2008, just after the collapse of Lehman Brothers Holdings Inc., at a parent-teacher meeting at a Brooklyn middle school, a teacher asked the students to talk about their fathers. Many glowingly spoke about their fathers—engineers, scientists, retailers, accountants… When one boy said his father was a pole dancer, there was pin-drop silence in the classroom. Even if your dad is a pole dancer, you don’t say this in a public place.

At the end of the meeting, when everybody left, the teacher hugged the student and said how proud she was of his courage and honesty. Sheepishly, the student whispered into the teacher’s ears, “Mam, actually I lied. I was too embarrassed to say my dad is a banker.”

I don’t know about the bankers’ children, but the bankers in India, including the retired, are an embarrassed and a much-harassed lot these days. The investigative agencies are hounding them for loans that have gone bad, and frauds. Are we replicating the Chinese banking system where many borrowers are dishonest, many bankers corrupt, risk assessment is poor and legal system weak, leading to large lump of loans not being backed by genuine collaterals? In August 2014, when the Central Bureau of Investigation (CBI) arrested the chairman and managing director (CMD) of Syndicate Bank Sudhir Kumar Jain for allegedly accepting a bribe to enhance the credit limit of private companies, it was a one-off case. Two years down the line, in September 2016, the CBI registered a case of alleged corruption against the then CMD of United Bank of India Archana Bhargava. Even then, the industry was not shaken. The banking community took note and saw the writing on the wall in January 2017 when former IDBI Bank Ltd chief Yogesh Agarwal and deputy managing director B.K. Batra were arrested on allegations of corruption related to loans given to Kingfisher Airlines Ltd. Since then, it has been a nightmare for senior bankers.

After the CBI named three top bankers in its first charge sheet in the Punjab National Bank (PNB) fraud case, Allahabad Bank chief executive officer (CEO) Usha Ananthasubramanian (who was at the helm of affairs at PNB until last year) and two PNB executive directors—K.V. Brahmaji Rao and Sanjiv Sharan—were stripped of powers. The agency also booked the CEOs of Syndicate Bank and Indian Bank—Melwyn Rego and Kishor Kharat. Others who have been under the CBI scanner include former UCO Bank chairman Arun Kaul and two former chiefs of Canara Bank, A.C. Mahajan and S.R. Raman.

Also, Bank of Maharashtra’s managing director and CEO Ravindra Marathe, executive director Rajendra Gupta and former CMD Sushil Muhnot have recently been arrested by the economic offences wing of Maharashtra police. A former RBI deputy governor, now a non-resident, has been barred from leaving the country following a look out circular issued by the CBI even though he is not an “accused” in a banking fraud.

Premier bankers body Indian Banks’ Association (IBA) has strongly protested against the arrest of Marathe, but we are not seeing mass protests against such actions. Why? Probably, the poor customer service by most banks has isolated the banking community from the masses. Traditionally, the big borrowers get all the respect from the bankers; retail borrowers are tolerated; and savers whose money banks use to lend get the least attention.

Should they be booked, sacked or divested of powers and arrested indiscriminately? Don’t we need to differentiate between a commercial decision (of giving loan) going bad and sanctioning a loan with a quid pro quo? Can instances of inefficiency, poor risk management and even negligence be interpreted as a criminal offence? There are many more questions. Why are corrupt private bankers spared? Since the prevention of corruption act is applicable to both the so-called public servants as well as private bankers, should private bankers also be booked for alleged graft? What about the politicians, bureaucrats and even ministers’ role in influencing or forcing bankers to lend to particular companies? In private, many bankers talk about such “influences” from these quarters for lending to Kingfisher Airlines. What about the board members who often broker loan deals? And, the promoters who entice the bankers with goodies to give loans that are not recoverable?

Indeed, dishonesty by bankers should be taken very seriously as they deal with public money and corruption in banking is as bad as murder in police custody. But for every bad loan, the bankers seem to be the softest target. By subjecting them to public humiliation and tarring the entire banking community with the same brush, we will end up killing public trust, the foundation of banking business. If the trend continues, public sector bankers will stop lending. Yes, the private banks are there to lend, but they pick and choose their borrowers. The Indian economy will be the biggest loser if the witch hunt continues.

Tamal Bandyopadhyay, consulting editor at Mint, is adviser to Bandhan Bank. His Twitter handle is @tamalbandyo.

Comments are welcome at bankerstrust@livemint.com