In his Ramayana, poet Kambar, when describing ten-headed Ravana’s deeply disturbed disposition, equates it to that of a man in debt (kadan pattaar nenjam pol ...). Aeons after Ravana and centuries since Kambar, debt continues to reign over and ruin the lives of individuals, families and businesses. But paradoxically, even if debt is death, you cannot live without it either, in these leveraged times. Small wonder that overdoses of this lifeline can turn fatal. Unless of course, you are a flashy liquor baron, and can afford lobbyists in and outside the government and run a high-flying business like Aviation! In that case, debt is at your service with debt service ceasing to be a concern!
Many pundits dub the raging recession more as a financial crisis rather than an economic crisis. And they place the blame, and quite legitimately at that, at the doors of overzealous borrowers, overstretched lenders, the consumption euphoria wrought by technology and entertainment and the fancy of spending future incomes today itself, thanks to retail credit. Globalisation and WTO ensured that the emerging economies of Asia and some elsewhere which were traditionally driven by savings also hitched on to the debt-fuelled consumption bandwagon. But unlike in the profligate West where the bulk of banking is in the private sector, in much of the Third world, which is facing the brunt of recession grossly disproportionate to its contribution to it, lending is primarily a public sector affair.
In India, the government too is in this ‘killer’ business of debt through nationalised banks and sundry other institutions. But since the government is theoretically a welfare instrument also entrusted with the duty of spurring economic growth in an underdeveloped country, the human face with a friendly facade and a liberal outlook towards small and first generation businesses is an obvious assumption. Now this is not surrogate socialism but a sensible kind of broad based capitalism that not only addresses the issue of concentration of economic power in a few hands but also incubates initiative and innovation till they can stand and sustain on their own.
There are a slew of statistics to show how micro, small and medium sized businesses form the economic bulwark of Bharath. But the issue is less about numbers and has more to do with the priorities of public policy. Even in normal times, officialdom is blinkered and when it does look beyond, its vision is skewed. These are tougher days. Impetus packages, intended to spur growth, have become the norm world over. And world over, it is the ones with the loudest voices who have walked away with the aid. India has just followed suit by bailing out the beleagured, albeit elite, aviation industry when the bulk of Bharath is being battered blue by the same recession. Really, next to entrenched politicos who have it good, rain or shine, it is these crony capitalists of the notorious Bombay club (now with branches in Bangalore and where-not) with their uncanny ability to pull strings and push things, who seem to prosper always.
Like most of business India, the private airlines (and public sector Air India) too are indebted to nationalised banks. Their debt toll after the financial crash is Rs 60,000 crs, secured and unsecured. Apparently, these are being owed for long, and even pre-dates recession which has only come as a convenient excuse for seeking alms. So by all banking norms, these loans have become Non-Performing Assets – NPA – , the nomenclature that is now haunting, humbling, humiliating and harassing lakhs and lakhs of small borrowers all over India. Just over three months overdues even if you have been prompt for three decades, and the draconian SARFAESI Act will fell you, deprieve you of your hard-earned assets, destroy your business and those dependent on it, all at a speed that is light years faster than the time taken to process and disburse the loan! By that logic, almost all the planes of the land should have been grounded, seized and parked on bank premises. But these royals have no challengers! They are indulged no end owing to their visibility and none less than the RBI, which for you and me is rule-bound to boot, will order rephasements and restructurings, besides waivers and what not. If indeed, Rs 60,000 crs can be reworked in a jiffy for just six aviators, why not do it for 6 lakh and more small timers who deserve it, who are sincere and for whom their business is a fulltime passion and not a passing fashion? Even a minor tinkering of repayments, of well-secured loans, will save millions of small businesses from unwarranted ignominy and avoidable insolvency. Aah, but small seems sin! And will continue to be unless they organise themselves. For if a handful of spoilt highfliers can browbeat the rulers imagine what (vote) banks of victims can achieve? Watch this space!
Compounding such conscious commission are other blatant omissions. The voiceless debtors suffer silently as the government winks at or looks the other way even in obviously dubious instances. Just this week, for example, the Chennai HC indicted a city-based banker and an advocate for colluding to defraud a borrower by alienating his property under SARFAESI. This is not an isolated case but the tip of an iceberg; such scandalous misuse of this sinister legislation is rather rampant with land sharks shaking hands with the ‘auctioneers’. In fact there is a thriving grey market for such ‘bargain’ property deals and insiders feel this is the next big bank scam in the offing. Bankers better beware!
Or take the other fad, micro finance. This seemingly sacred service actually comes at an exhorbitant price as small vendors like fruit sellers, flower sellers etc are fleeced on a daily basis. And forget the clandestine Kandhu or meter vatti mafias, many leading NBFCs borrow from nationalised banks at PLR (9% or whatever) and lend to small traders, truckers, and businesses at almost 36% or even more. Imagine the relief to borrowers if the banks were to lend that directly. Instead, the ‘benevolent’ banking system is a partner, albeit a shortchanged one, to this monstrosity. And all this when there are clear laws against usury.
Debt has always broken more bonds than it has built, no doubt. But its mismanagement by the government and law of the land is destroying something which is much more critical — human capital which embodies hope and hard work. For the ordinary folk with empty pockets and exemplary ideas that is the only capital available to leverage for loans. Unless, of course, he is in the ‘business’ of allocating spectrum or organising games with our common wealth or fixing matches, all of which too needs no capital.
Obviously, even with nine heads less to scratch, Ravana’s predicament will still be a bit too much for us.
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