Cheques amp; Balances

The bank unions have gone silent after a quick victory, but had the battle continued, the next to be questioned would probably have been the task force chairman K V Kamath and other officials of ICICI. Only two weeks ago, ICICI participated in yet another bailout of the Essar group and Jindal Vijaynagar FIs are funding interest during construction and have agreed on massive concessions in rescheduling repayment. Were these not a desperate attempts to hide the bad loans and defaults of institutions? ICICI could do well to come up with tough decisions in dealing with its own corporate clients instead of worrying about the larger issue of bank NPAs or announcing plans to get into the e-commerce business as a way of increasing its market valuation.

Let us look at a different example. Vijay Kalantri is a member of the committee set up by the Securities and Exchange Board of India SEBI to work on a mandatory code of Corporate Governance for industry. Kalantri8217;s name appears regularly in the Reserve Bank of India8217;s annual publication of companies against which banks have filed recovery suits. He still manages to be a director of a couple of nationalised banks. This is not an attempt to single out Kalantri. In fact, Kalantri himself would probably be in the best position to name scores of powerful politicians and businessmen who hog important positions on committees and boards of banks and institutions.

The CII8217;s episode will, hopefully, alert the Prime Minster8217;s Office PMO on such embarrassment too. After all the PMO has come up with this new trick of setting up committees packed with private industrialists. Invariably these committees are appointed in areas where the government has no political will or intention of initiating tough and sweeping reform. No sooner one report released then it is rejected and another committee appointed. The banking sector has been an important target for such camouflage. Thus, if the Verma committee8217;s call to pump in Rs 5500 crore once again into the weak banks was found unacceptable, then Deepak Parekh has been called to work out a miraculous rescue for Indian bank does anyone want to lay odds on Parekh recommending the closure of Indian Bank?

These committees only help it perpetuate what Narayan Vaghul calls the MAFA syndrome 8211; or Mistaking Articulation For Action. Actually, nobody is fooled anymore except the government and its bureaucracy. The CII may argue that the 25 other recommendations made by the task force were ignored in the controversy over the closure recommendations, but aren8217;t all these more-or-less further articulation, elaboration and embellishment of recommendations already made by several other committees in the past?

Look at a few examples. On sick bank and bad loans, the Narasimham Committee of 1990-91 had made frank and sensible recommendations. It suggested the creation of an Asset Reconstruction Fund and even discussed the possible mergers of strong banks with weak ones, based on a proper fit and feasibility study. The second part of the report was not even included in the committee. The second Narasimhan Committee, the Verma Committee and several other committees, reports, studies and seminars have debated the subject endlessly. The Indian Banks8217; Association which should rightly worry about sick banks also has a committee working on it. In the decade since Narasimham, the declared bad loans have mounted to nearly Rs 60,000 crore and the evergreening of accounts continues.

Difficult decisions such as tightening foreclosure laws, strengthening Debt Recovery Tribunals, granting autonomy to bank management, reducing government holding below 51 per cent, scrapping shelters such as the SICA Act and amending the BIFR Act remain in MAFA heaven and have also found place in most reports. Obviously there is no will to go ahead with reforms instead of debating it.

The problem is not restricted to bad loans and sick banks. It is exactly the same with disinvestment of public sector undertakings. If the government was serious about accepting and implementing advice, it would not have allowed the Disinvestment Commission to die. In fact the sensible recommendations by the Commission, which raised no protest from any of the stakeholders such as PSU managements, employees or business associates became an embarrassment for politicians and bureaucrats, because it drew attention to their own unwillingness to give up control over these corporations. So the government ignored the Commission and bungled along on its own 8211; whether it was the tussle with Suzuki over the fate of Maruti, or the gift of Air India8217;s landing rights to Virgin Airways only to be slapped with the embarrassment of the Virgin-Singapore Airlines alliance. The crossholding of oil company shares of last year causing Rs 24,000 crore of market capitalisation to vanish in weeks was another example while the latestgimmick is that of the power ministry in stripping NTPC off its reserves by making it takeover NHPC.

The finale for this financial year will be another attempt to meet the disinvestment target through a Special Purpose Vehicle or a modified Asset Management Company 8211; either of them will do nothing to increase the value of PSUs because no ministry is willing to grant them any autonomy.

The government8217;s constant struggle to keep dying and redundant institutions artificially alive also spills over to the most capitalist of institutions 8211; the stock exchanges. India has 23 stock exchanges of which at least four are national in character. Even if one assumes that some smaller or regional stock exchanges will find a way to survive in niche markets, we still have 15 stock exchanges too many, which do not have no future whatsoever. SEBI8217;s valiant attempts of keeping them alive, by asking them to become members of larger stock exchanges or to get into the depository business is so fraught with danger, that it needs a separate discussion.

The bottomline is that the government is not really looking for any advice or solutions. If it wants to do something, it does it, without any prodding at all witness the setting up of a completely unnecessary Rs 100 crore-venture fund for the Information Technology Industry. All that it wants is continuous articulation of solutions, remedies and recommendations so that it is all mistaken for non-stop action. Is anyone fooled anymore?

Author8217;s email: suchetadalalyahoo.com