Written by Deepali Pant Joshi
Tamal Bandopadhyay’s book is ambitious in scope and design, written with domain knowledge, lucidity, and the light touch of the professional newsman. Beginning with the turbulent decade which saw the collapse of Lehman Brothers, he outlines the cascading sequence of devastating events which followed. The Reserve Bank of India (RBI), led by the astute Dr YV Reddy who successfully ring-fenced the Indian banks from the turmoil, comes in for well-deserved praise. However, the brickbats are quick to follow, in the context of measures taken post-Lehman, when the world went mad and central bankers opened the liquidity taps, the diehard monetarists of Mint Street had to cope with new scenarios, and in one horrifying fortnight the conservative central bank cut its policy rate by 100 basis points, cash reserve ratio (CRR) by 250 basis points and opened a
Rs 200 million liquidity window to enable mutual funds to face redemption pressures.
The following piece was also written in the context of further unexpected easing of rates, CRR/SLR cuts, a buyback of market stabilisation securities, and a Rs 400 billion refinance facility. Scathing though the attack is, the author overlooks the fact that RBI relaxed its hitherto rigid monetary policy as did all central banks, to stabilise their suddenly jeopardised economies. One wonders what effect hindsight has had on the author’s opinion.
The book is a compilation of newspaper columns. It might have been a better book had the author traced the underlying crisis and not just the events as they occurred, and set out the lessons of the episode with their relevance now and in the years to come, as he does in the section on microfinance. The chapters which analyse the microfinance crisis that nearly decimated the industry and the dramatic recovery of the sector are marked by lucid analysis and a grasp of underlying issues.
Some pieces here deserve to be read, such as the columns which focus on the importance of reforms in public sector banks. While dismissing the idea of consolidation, Bandopadhyay observes that regulation should be ownership-neutral, that PSU banks lack efficiency, expertise and the right governance structure to keep pace with their private sector peers. At the same time, some chapters feel extraneous, such as an anecdote about the dismissal of a GM by a CMD for leaving him stranded on a muggy Mumbai runway, or famed tales of venality and corruption, of the single malt connoisseur, the typology of Chinese food, Punjabi food, the Gujarati thali of crisp currency notes. This is undoubtedly interesting to read but a dry diagnostic of the ills of public sector banks would have provided more food for thought to the policy-maker.
However, the many tales of collusion and corruption mentioned here address some unanswered questions and strengthen the case for an end to the PSBs. He dismisses the stillborn child Bharatiya Mahila Bank as a “misadventure” and likewise enquires whether there is any need for a Mudra Bank as a refinancing agency. It borrows from the Bangladeshi model of the Palli Karma Sahayak Foundation (PKSF) which, too, Bandopadhyay deems as born to fail. He dismissed the Bank Board Bureau as a ‘paper tiger’ in a remarkably prescient column written in February 2017.
The entire section on ‘Bad, Bad Loans’ deserves to be read several times over as a grim reminder of the depth and dimension of the challenges which confront the Indian public policy-maker. This is truly the main course of the book. Bandopadhyay does not shy away from discussions on the conflict between the RBI and the government. On demonetisation, he is non-judgemental on the efficacy or excess of the whole exercise.
For a light, frothy dessert, Bandopadhyay serves up interviews over business lunches with the who’s who of Indian banking, such as Deepak Parekh, ‘Steady Eddie’ Aditya Puri, Om Bhatt, the charismatic change-maker of SBI, and Pramit Jhaveri, head of the Citi which never sleeps. These interesting accounts afford a glimpse into the private personae of the men and women who have shaped this tumultuous decade, and their thoughts on the years to come.