Why exclusivity of investigation? Action against banks needs to be based on principle of equity

Vijay Mallya

Prabhakar Kulkarni*

Since the disclosure of the Punjab National Bank fraud, banks and their transactions are in 
focus of both the investigating agencies as also the media
 organizations. This is in public interest. But action and
 investigation in a few banks and in few cases and neglecting or 
sidetracking other similar cases and the concerned banks violates the
 basic principle of equity.

If both the government and large number of
 banks, consumers and investors want to keep the banking system clean for
 avoidance of frauds and scams, the cleanliness drive should
 encompass all public and private sector banks. 

While speaking before the Public Accounts Committee (PAC) of Parliament, the
Reserve Bank of India (RBI) Governor has said that the RBI lacks the autonomy to control 
banks. But this is only the half-truth.

Because, RBI has used its
autonomy in introducing two concepts of ‘project finance’ and ‘
consortium of finance’, which are favourably used to allot crores of
 rupees to big corporate giants. One of which is Vijay Mallay. The State Bank of India (SBI), 
which is enjoying the status of a government bank, had taken the lead to 
persuade other  17 banks to come forward to finance Mallya on the 
concept of ‘project fiancee’ and the ‘consortium’. SBI move, in early 2010s, was based on Mallya’s proposal for loan amount for future prospects of Kingfisher Airlines. However, his projection later proved to be more virtual than real.

When the Mallya
  phenomenon came to light, in a TV discussion, the banking union leader
 Vishwas Utagi made a statement that Mallya is not the one but there 
are 7,000  Mallyas. Later, when asked, Utagi confirmed his statement
 and said that the way big giants are financed with favor is disclosed 
by the Union with names of the willful defaulters. But no action is
 taken and only Mallya is open in the limelight.

While Chanda Kochhar of the ICICI Bank is now being focused, and the chief of the Bank of 
Maharashtra, with other officials, are arrested on charge of favouring 
the Pune-based DSK group, what about other similar cases as also the 
much-discussed the Mallya case? How loans of crores of rupees were
 sanctioned by so many banks, what were the security and who were the
 guarantors and why the action was not taken within one year after the 
loan was in the NPA are the questions not being raised so far?

If so much light is on the Mallya case, why the way his huge loan was
 sanctioned and what irregularities were condoned, and whether there was
 any collusion by the concerned bank officials (as is alleged in the
 BoM and DSK case), is not so far investigated?

This is a vital
 question, which needs clarification. And if there are more cases of the 
type and are already disclosed by the Union what action of 
investigation is being taken in those other similar cases is also 
important. This is more so because most of the defaults of big willful
 defaulters are relating to big amounts sanctioned under the strategic 
devices of ‘project finance’ and ‘consortium of finance’. (It should
 be noted in this context that loans were given by banks on only the 
allotment order in 2-G spectrum cases as reported in the media!)

This device is not used in any case of an educated unemployed with his 
‘project’ of self-employment enterprise or any small-scale
 entrepreneurs who are safely denied loan on one pretext or the other 
despite their viable projects. Misuse of loans for spending on
individual needs of garments and footwear is also a very minor
 objection in view of huge donations or birthday gifts to wives with 
costly cars and planes and high amounts spent in marriages and even 
honeymoons and bills are paid by company accountants. This is a known 
‘modes operandi’ which is not so far objected either by bankers or IT 
sleuths or Enforcement Directorate.

Now that the DSK case is being 
accused of these flaws let all similar cases of use and misuse of
company funds for private consumption should be duly investigated. It
 is obviously in both the public interest and also in the interest of
legal necessity to follow the principle of equity that all such cases
in all banks need investigation and necessary action.

*Senior journalist and columnist

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