Debt write-offs

Politicians in power are notorious for misspending public money. Bankers with all their financial skills are not far behind. Both are generous at the cost of the taxpayer. When they can't recover a loan despite being armed with vast powers, they write it off. Between 2004 and 2015 public sector banks waived Rs 2.11 lakh crore of bad loans, almost half of these in just three years (2013-15), according to official information. Both the Congress and the BJP were in power at the Centre during this period. Mishandling of finances, therefore, is not the monopoly of any particular party.

Politicians and bankers talk of growing NPAs (debts becoming irrecoverable) as casually as they do of climate change or congestion on roads. The mismanagement of public money at such an enormous scale seldom becomes an election issue. Almost each year a budget announces fresh capital infusion into troubled banks, and also a fresh dose of taxes to make up for the diversion. No matter how badly managed, government banks are not allowed to fail or go into private hands. Every time they are on the verge of collapse, a bailout awaits them. Regardless of the scale, mismanagement of finances is easily forgiven and forgotten. In more demanding societies such incredible acts of official charity — or cover-up — would not go unnoticed. Rarely is anyone held accountable. No attempt is made to bare a possible politician-middleman-banker nexus at work. 

Bankers indulge in reckless lending — to meet targets, for personal gain or just to please a politician, as a future investment. They notoriously chase small borrowers but are discreet in naming and shaming corporate defaulters. Political protection helps them escape. As it recently happened in the Bank of Baroda, even officials caught in the act — money laundering is this case — get away lightly. There are excuses to explain away the debt pile-up. There is a tendency to blame economic slowdown or/and poor corporate performance for mounting bad debts without explaining why private banks operating in similar circumstances remain unaffected. A credit push is now needed for the economy to kick-start. Banks saddled with stressed assets can't lend, and debt-stressed companies can't borrow any more. That is the vicious cycle they are caught in.