`CII report on bank closure is an apology of a robbery’

is veteran CPI Rajya Sabha member Gurudas Dasgupta, who raised the issue in Parliament and also released some of the names of the defaulting industrialists. In an interview with RISHI RAJ, Dasgupta labelled the CII report “an apology of a robbery by the criminals”.

Of the three banks recommended for closure, he added, United Bank and UCO Bank have now started showing profits. However, theCII report has quoted the M.S. Verma report on banks as stating that UCO Bank has been incurring operating losses through the past three years. United Bank, which was in a similar position, recorded operating profits only in 1998, mainly due to a windfall income of Rs 111 crore by way of interest received on income tax refunds. Excerpts:

You have been quite vocal in criticising the CII report on closure of the three weak banks. How do you view the whole issue?
As you know, the CII appointed a National Task Force to look into the non-performing assets (NPAs) of nationalised banks. Their report suggested, among other things, closure of United Bank, UCO Bank and the Indian Bank because, according to them, their position was irretrievable. Now, with regard to United Bank and UCO Bank, I know, since their headquarters are in Calcutta, that they were making losses at one point of time. But now for sometime these two banks have been posting profits and these are on rise. Both these banks’ net worth isaround Rs 500 crore (United Bank: Rs 500 crore and UCO Bank: Rs 513 crore).

Together, the employee strength of these two banks is more than 50,000. Their capital adequacy ratio is above the minimum fixed by the Reserve Bank of India. Therefore, it is difficult to say why such a recommendation (was made) when the banks were picking up well. Definitely, the suggestion cannot be based on economic fundamentals of these banks. To me, it appears that it is out of their craze for privatisation that they picked them up. Their aim may also be to sabotage the recovery of these banks.

Any other objection with the report?
Yes. Apart from these three banks, they also suggested privatisation of five more banks, including the most leading bank of India. Therefore, again their thesis cannot be based on economic fundamentals. However, there is a more serious aspect to the whole issue, that is the way they have made the whole thing public. Normally, the NTF should have sent the report to the CII which, in turn,should have sent it to the Finance Ministry. Instead of taking this course, they made the report public and since people believe that the CII has clout with the Government, naturally there was a scare among the depositors and employees. It was criminal on the part of the CII to do such a thing. Moreover, five members of the CII study team of nine are associated with corporates which have defaulted in the payment of dues to the banks, amounting to more than Rs 100 crore.

(One of the names mentioned by Dasgupta is of J.J. Irani, MD of TISCO, who he said was on the board of Powmex Steels Ltd, Bolingir, which is a defaulter. However, Tata Steels clarified that Irani was never on the board of Powmex. He was, `at the insistence of the West Bengal Government’, on the board of GKW, whose promoter also happens to be the promoter of Powmex. Irani resigned from the board of GKW in November 1997.)

You have talked about two banks. What about the Indian Bank, which was given a bailout and has eroded its net worthtwice?
The case of Indian Bank is a case of political blunder. The solution is not closing down the bank but stern action against the defaulters so that repayments are made. This is the way to serve the interests of the depositors. There is no question of closing down any of the three banks.

The whole issue has raised questions over the relevance of the Banking Secrecy Law, which prohibits banks from publishing names of defaulters. Do you think it should be amended?
Yes, the law should be amended and there should be no problem with it because you are only publishing those names which have violated their legal obligation of paying back the loan. This is a criminal breach of contract. In fact, our demand is that the law should also be amended to treat such crime as cheating and to make it a criminal offence as against a civil matter at present. If you study the pattern of defaults, in most cases it is wilful, because of diversion and misutilisation of funds. It has nothing to do with businessor market conditions. Further, I do not understand that if names of tax defaulters can be published, why not those of loan defaulters?

Granted that industrialists have defaulted on loan repayments. But what about the role of unions? Why do they only raise such demands when talk of either closure or privatisation or some bit of restructuring comes? Why not raise such demands during the normal course of events so that such NPAs do not get built in the first place?
The unions have been, for long, raising demands for publishing the names of the defaulters. It is the Government which has not been listening. To give an example, I will tell you that we have been raising a demand for special audits for banks because their present auditing is not viewed as satisfactory by us. Therefore, we have demanded that let the Comptroller and Auditor General (CAG) do the auditing of banks, or some other commission. But the Government has not listened to us thus far. I will give you one more example. There was a scamby Harshad Mehta in 1992. The Government constituted a Joint Parliamentary Committee on it. I was a member of it. It made several recommendations so that such scams do not happen in the future. But none has been accepted by the Government till date. I would say that if there is anybody to blame for the rising NPAs, it is the Government, which has done little to stop this from happening.

Do you agree with the M.S. Verma Committee report on restructuring of banks, which is at present with the Government?
We disagree with many parts of it. But it has nowhere recommended closure, though it was appointed by the RBI. But these self-appointed guardians did it. It is, in fact, an apology of a robbery by the criminals.