The man who got away

Even the worst detractors of Vijay Mallya would grudgingly admit the man is debonair and suave. It is exactly this demeanour that probably prompted many Indian banks to play around with their largesse to favour a man who has betrayed them.

I refuse to believe that Mallya has just gone on one of his picnics to play host to celebrities and will be back home very soon. He is too familiar with the travails of another notorious defaulter, Subrata Roy of Sahara, who is yet to get out of the heat turned on him by the highest court of the land. He is a clever operator and not dumb to surrender to the law.

It is now well established that the CBI questioned Mallya at least on three occasions in the not very distant past and followed it up with a look-out notice to which airport immigration seem to have turned a blind eye to let him go out. That there was a CBI investigation going on against Mallya was no State secret. The media was full of it.

The first question therefore is whether, once it was known that Mallya was under CBI scanner, did any of the banks which had lent him huge sums of money ever bother to find out what was going on. I would like to hear a response in the affirmative at least from those who head the State Bank of India and the IDBI, who figure at the top of the list of an array of institutions who were undeniably and also unjustifiably kind to him. If there was at least a semblance of an attempt on their part in this direction I would be more than pleased.

The CBI is not the IB where secrecy counts a lot. A telephone call to the CBI Director or his deputy from any bank Chairman would have yielded relevant facts and hastened the banks’ approach to the judiciary for locking the stable of the most valuable horses in the country! The pun here is intended.

I do not rule out dishonesty and negligence on the part of a few black sheep among the Immigration staff, despite all the checks and balances dovetailed into the system since the department became part of the IB in the early 1980s. Hobnobbing with the Customs, some immigration officials had become vulnerable and susceptible. Their conduct needs to be investigated thoroughly.

The Mallya episode revives memories of my days, first in the CBI, and later as member of the Bank Frauds Advisory Board set up by the RBI. The latter body was formed only to protect honest public sector bank managerial staff who were hounded by the CBI whenever a fraud took place.

We in the Board were conscious of the need to draw a clear distinction between customary business decisions as juxtaposed to dishonest ones. Recklessness to generate bank business was to an extent condonable, but definitely not blatantly fraudulent decisions to favour undesirable customers with a questionable track record.

The CBI was inclined to be harsh and less charitable to bankers who had lost huge money, which was euphemistically called Non-Performing Assets (NPA).

Also, the new 1988 Prevention of Corruption Act which penalised even routine decisions that caused loss, but without any pecuniary gain to the public servants who took such decisions, hardened the CBI stance, much to the discomfiture of bankers. I remember many cases that came to me at the CBI were borderline ones, which called for some understanding and imaginative appreciation of the circumstances in which a banker agreed to lend to a customer, who could not eventually pay up.

When I was at the helm of affairs I had heard of tales of political influence working on the top management in their decisions to lend. Managers would not admit to its prevalence.

But then complaints started assuming sharper tones about a decade ago. I am not very sure that such a factor was not at play in the Mallya case. I would be surprised if anyone asserts it did not, given Mallya’s enormous clout in the political firmament. Bank chairmen transmitting such pressure down the line are not uncommon.

If a chief cannot ward off such unholy influence on what should be a professional decision, how can the lesser luminaries at the level of a bank branch not fall prey?

The feeling that I get from the latest reports is that banks involved here have been reckless at the cost of prudence. The loans doled out to Mallya were very possibly based neither on an assessment of the projects that he proposed nor his capacity to repay.

They were given more because of the awesome personality that he was, particularly after he had become an MP. He just needed the money to indulge in his various (mis) adventures, and the obliging banks fell prey.

While a number of current top bankers in the public sector are great professionals with sterling integrity, there has been a substantial number who earned their spurs through sheer political peddling. Some of them recently got into serious problems with the law, mainly because of their inability to resist the pressure of the political contacts, which they had used to reach the top.

They just cannot resist the pressure for reckless lending to persons with dubious record. I am happy that the system for top appointments has been now placed on a firmer footing.

At this infamous moment of the history of banking in India, I cannot but recall the one and only RK Talwar who stood like a beacon for the future generation. He stewarded the State Bank in difficult times (1969-76) and stood for ethics all the way.

He paid a heavy price for his emphasis on professionalism and honesty. It is an entirely different matter that fate took care of those who engineered his exit. But then, if a Talwar cannot show the way for current bank leaders, no one else can.

The writer is a former CBI Director and a former member of RBI’s Bank Frauds Advisory Board