Friends
In addition to the factors
analysed in previous posts responsible for disaster in the Banks in the form of
NPAs and Stressed accounts i.e. a)Fast development of Banking industry; and b)
Sudden Growth in Indian Economy, I would like share my views on one more major
cause that led to huge losses to the Banks. This important factor was
“Political Compulsions and Corruption”. Congress Government under the
leadership of Mr. P.V. Narsimha Rao introduced liberalization to the economy.
It was major turning point for the country and helped a lot to this party in
ruling the country. They were encashing this very meticulously by branding
other parties either communist or dumb in economics.
Under new environment of liberalization,
the economy was taking new shape and offering lot of opportunities to the
domestic and overseas players. The volume of money was too much and luring the
people from all walks. Political parties had started looking at economics as
intelligent and smart players. They understood their importance in policy
framing, decision making, appointments and fund raising. They started
interfering in banking systems, guiding and helping the business community in
sourcing finance. These activities were root cause for rampant corruption in
the system.
Then in 1999, NDA Govt. came
under the leadership of Mr. Vajpayee who inherited the fast growing economy and
huge opportunities to develop. Infrastructure was the focus and huge investment
was required in Infra, Power and Telecom, which would not have been possible
without government support. These developments somewhere not only forced the
banks to lend aggressively but also liberally. It was the beginning of
corruption and defaults too. The surprise exit of NDA made the new UPA
government overconfident. The power to new group was for next 10 years. The
failure of opposition parties to control the ruling parties (may be some nexus,
I don’t know) was quite visible. It was the public at last who threw away this
group from power and again gave opportunity to NDA under Mr. Modi.
Thus developments from 1999-2013,
Interference of political parties in lending money, appointments and policy
making resulted into sharp increase of lending. This was not done judiciously
and hence huge chunk of lending became non performing. Bureaucrats and
politicians for their personal benefits put the banks in big problem.
Corruption was rampant, we can’t deny its existence today even, which to a
great extent is the major factor responsible for NPAs. Compulsion of moving
fast and feed the requirement of funds to the economy also lured for lending
very liberally.
Government should give
serious thought before giving money to the Banks and ensure that necessary
precautions are taken as this is poor public’s money which has been given in
past too. In fact, large part of such infusion drains out in due course and
again the demand for more infusion is raised by the Banks. It gives me the
memories of Ram Leela where in Kumbhkaran demands continuously huge quantity of
food after waking up. Better the Government wakes up at least now and control
this drainage of funds.
CP
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