Ominous Signs

The year 2017 is passing away and it has brought another grave piece of information to the people, whatever the official claims about growth of GDP etc. The Government of India [GoI] has brought a new bill, naming it ' Financial Resolution and Deposit Insurance Bill, 2017'. As matters stand now, there are about 10 trillions of rupees of unpaid debts to banks, and of this astronomical amount, about 2.5 trillions are owed by twelve big business houses. In respect of the rest too, the scene is dominated by big borrowers, not ordinary people. What is publicised during electioneering about loan-waiver to farmers is sheer hypocrisy if it is compared with bad debt of ‘big bosses’. The excuse that the inability to repay the debts is due to recession etc is hardly sustainable, because owners of these business enterprises have already withdrawn their investments plus profits, thus rendering the establishments even more incapable of repayment of debts. The GoI is patently unwilling to punish big offenders like the Ambanis and Adanis and as for the Vijay Mallya case the less said the better. Even if it succeeds, through the newly formed National Company Law Tribunal, in selling the movable and immovable properties of the companies, only a part of the debts will be recovered. The rest has already found its way into the pockets of the borrowers.

To counter the problem of sickness of banks, the GoI has brought the FRDI bill. The Bill has proposed the formation of a Resolution Corporation, empowering the latter to alter or even cancel the liabilities of sick financial institutions including sick nationalised banks. Under the prevailing system, a depositor, with the unwritten guarantee of the state, is entitled to withdraw his/ her deposits from a nationalised bank according to needs. The proposed Corporation may cancel this entitlement if the bank has already become sick owing to the burden of defaults. In such cases, the depositors, the overwhelming majority of whom are persons of modest means, will not get back their money. Alternatively, the Corporation may force depositors to purchase shares of the concerned bank/s , but such shares are worth little when the bank is already sick. A third method is arbitrary lengthening of the terms of deposits, giving more trouble to depositors. So, reduced to its essentials, the Bill implies that the burden of unscrupulous practices by large borrowers is to be borne by ordinary depositors, which mechanism means certain ruin to many of them. In other words, the burden of inefficiency of banks and of an unholy alliance between large borrowers and banking authorities will fall on innocent customers.

 The country has already gone through the phenomenon of demonetisation without notice, and the hollowness of the claims in favour of it has been much discussed. Suffice it to say that the richest sections of Indians, e.g. the corporate houses, did not find it at all harmful, while the common masses suffered much. The latest move, that of the FRDI Bill, is more blatant. It seeks to condone the sins of the large defaulters and to extract the price from the ordinary depositors who keep their money in banks in the form of demand and time deposits and withdraw their money for their day-to-day living and meeting their future contingencies. The GoI is now going to appropriate them so that the plunderers of the resources of the nation get away with impunity.

It may be that the parliamentary 'left' and some other parties will oppose the Bill in parliament. The Congress, led by the Gandhis, whatever the intensity of its campaign against Narendra Modi for electoral purposes, is not as yet much vocal, simply because the policy of fattening the corporate tycoons is a legacy of the Congress regime. It may at most raise a feeble voice of protest. The need of the hour is a strong nationwide movement against this move to transfer resources from the common people to the corporates. To what extent such a movement can be built up remains to be seen. Grievances will certainly be articulated, but without proper organisation and leadership, they cannot be given a coherent shape. The final impact of the Bill is yet to be felt, but the signs are ominous. This must be realised by all. Banks will be more like mutual fund entities in the coming days. In truth, apprehending a major crisis in the banking sector in the wake of FRDI Bill getting passed in parliament, mutual fund companies have already started to target small depositors and investors by offering lucrative incentives through massive TV advertising campaign and organising seminars in small towns. People are likely to be swayed unless they are politically mobilised against the notorious FRDI Bill. In notoreity Modi has surpassed all his predecessors. From demonitisation to digitisation to GST, all these dramatic initiatives couched in ‘beautiful language’ were pitched as a grand narative against corruption. In reality, this cleansing operation as they call it, is an empty rhetoric.

 30-12-2017

Frontier
Vol. 50, No.26, Dec 31 - Jan 6, 2017