“Let Nirav Modis and Mallyas Manage Banks”
- So says Shekhar Gupta, former editor of Indian Express and currently Editor in Chief and Chairman of ThePrint
- So says Arvind Subramanian, Chief Economic Advisor to the Government of India
- So says Mihir Sharma of Bloomberg
- So says Times of India
- So says ASSOCHAM
Vijay Mallya, Nirav Modi and dozens of other rich capitalists defraud the banks, so why not hand over the control of banks along with public money to them. That is the logic of these hand servants of capitalist class.
The capitalists (private) cheat each other and defraud the public in many ways. For that they use the banks, and capital markets.
1. Don’t pay loans, stage frauds
From 2012-13 to 2016-17 Rs 69,770 crore worth of scams were discovered in Indian banking sector. RBI says the such scams are reported only after keeping them as bad loans for 2-3 years.
Ever since the RBI started the Asset Quality Review, which forced banks to report bad loans, the magnitude of bad loans has suddenly jumped to almost Rs 8 lakh crore – an eight-fold increase in less than six years.
In this context, the Rs 2.11 lakh crore bailout given by Modi government to the banks is in fact a bailout to the private corporates.
2. Brands as collateral
- Why do we buy a Apple product paying 5 times the price of an equivalent product?
- Why someone travelled by King Fisher Airlines paying a premium over other airlines?
- Why Nirav Modi spent millions of dollars (stolen from Indian public) to pay Priyanka Chopra and Hollywood stars to promote his diamond jewellery?
The answer to all these is “Brands”. Brands sell, brands fetch higher price. But in reality brands are illusions created by capitalists to compete with each other and defraud the general public.
This is borne out in the case of both Vijay Mallya’s King Fisher brand and Nirva Modi brand.
The defunct Kingfisher Airlines, which owes around Rs 9,000 crore to various banks, had used a valuation of Rs 4,100 crore (done by Grant Thronton in 2011-12) for its brand as the single largest collateral for its loans.
However, an evaluation done by the lenders through RBSA Advisors in 2013 found the valuation to be around Rs 200 crore , or five per cent of the valuation by Grant Thornton. Another valuation done in 2015 pegged it at Rs 100 crore.
Nirav Modi has shown his company to be worth Rs 6,000 crores based on which he was planning to repay the loans. Most of the value of the company is value of brand which lies in tatters after his scam became public. That is why he blames PNB for making his dealings public and spoiling his brand value. If the bank allowed him to operate further and continue his swindle of public, he would have paid back the loans using his brand value!
3. Manipulate share market (Was there an insider trading in PNB?)
The shares of Punjab National Banks saw a see saw swing in January and February this year. Compare the prices with the timeline of the scam becoming public.
- From Rs 165.55 on January 16th – PNB suspects fraudulent transactions
- it went up to Rs 194.65 on January 24 – while Nirav Modi was cleaning up his stables and PNB complains to CBI of Rs 287 crore scam on January 29th
- fell to Rs 161.65 on February 12 – Total fraud above Rs 11,000 crore detected
- and to Rs 125.55 on February 16th – PNB files fresh FIR on 13th
- Now it is hovering around Rs 116.50
In any decent capitalistic country, an investigation will be launched into all those who bought PNB shares in January before the news of Nirav Modi’s theft broke out, and sold it just before the news came out and price crashed, making a killing.
Will it happen in India?
All these show that capitalists in general, Indian capitalists in particular are steeped in scams and corruption. But, their mouth pieces now say that the banks should be handed over to the control of self same private corporates. With their policy Vijay Mallya would have owned a bank, Nirva Modi would have owned a bank, no need to indulge in scams!
In reply to ASSOCHAM which called for privatization of public sector banks, All India Bank Employees Association said, “Let ASSOCHAM advise their members to repay the bank loans and should condemn Billionaire Jewellery designer Nirav Modi for his cheating the banks.” (AIBEA condemns ASSOCHAM’s demand to privatise banks)
“It is very strange and interesting that the Associated Chambers of Commerce and Industry of India, the mouthpiece of the industrialists and business houses has suggested privatization of banks in view of the recent fraud in PNB. They have conveniently forgotten the track record of private banks in our country. If private banks are really efficient, why these banks were closed down and merged with others. Most of these banks were merged with public sector banks. PSBs have become the Neelakana Mahadev to swallow the poison of failure of many private banks and it is funny that Assocham is asking PSBs to be privatized now. We understand their greed but they cannot claim that private banks are more efficient”.
Bank failures in India were out of control before Independence in the absence of comprehensive banking legislation and structured supervision mechanism for the banks. During 1913 to 1936, 481 banks had failed in the country and the situation did not improve in the post-Independence period even after the spread of the Banking Regulation Act in 1949.
In the year 1951, there were 566 private commercial banks in India with 4,151 branches. An average 40 banks failed in India during each year between 1947 and 1955. Almost 106 banks were liquidated during the period 1954 to 1959 among which 73 banks went into voluntary liquidation and 33 into compulsory liquidation. To protect public savings, it was considered better to wind up insolvent banks or amalgamate them with stronger banks. (Bank failures in India)
All of them were owned and operated by private management. How did the private management stop their failure?
The problem is not the ownership structure of the banks. It is the private corporate control of economy. Corruption and scams are in the DNA of capitalism. How can you root them out without rooting out capitalism. The capitalists keep discovering legal and illegal ways of gaining advantage (looting) over their competitors leading to scams, bank failures and crises.
But our pundits advocate greater control in the hands of private capitalists!
- PNB fraud: Privatise more PSBs, toughen rules, says Arvind Subramanian
- PNB fraud: Bankers, not bureaucrats, should run India’s banks – Mihir Sharma
- If Modi wants a real legacy, he must undo Indira Gandhi’s disastrous bank nationalisation – Shekhar Gupta
- Money for free: Public sector banks are in governance collapse, government needs to step aside – Times of India
- PNB fraud: Assocham calls for privatising PSBs
The village landlord is a womaniser, abducts and rapes women of the village indiscriminately. To solve this problem the wise men say “Why the women live in their houses? if all are under the landlord’s control then there will be no abduction.”
These are the wise men who rule us in government and inform us in media.