Vivek Kaul’s unsparing and inspired analysis of the
shambolic state of Indian banking and the Public Sector Banks owned by the
government in his new book, Bad Money: Inside the NPA Mess and How it Threatens
the Indian Banking System is hugely fascinating and every bit as horrifying.
Thanks to the likes of infamous defaulters on behemoth loans like Nirav Modi
and the King of good times, Vijay Mallya, the media as well as the public found
themselves paying attention to the twists and turns in the murky world of high
finance, especially since the poster boys for bad money merely represent the
small fry in a gargantuan problem. The abysmal state of the banking system
reeling under the crushing weight of bad loans to the tune of over 10 lakh
crores has become painfully apparent.
The questions boil over demanding explanations… How
did the Indian Financial System managed to land itself in such a hopeless mess?
Why were so many defaulters and corporates allowed to get away scot – free with
their ill – gotten gains having brought the economy dangerously close to the
brink of total collapse? What is the government’s role in all this and why
exactly are key officials who ought to have kept their eyes on the ball caught
so often with their pants down? Exactly how much of the taxpayers’ money has
been forked over to keep the PSBs afloat? Is the money stashed in banks after a
lifetime of toil and labour safe? What is the exact price being paid for the
staggering levels of corruption, malfeasance and disgraceful negligence on
display? Is there a feasible solution to the banking crisis? Kaul undertakes
the task of providing simple answers that are never simplistic while
unravelling the many layers to a complicated issue without being condescending
or obfuscating despite possessing a formidable intellect and a gift for
grasping the intricacies of the complex, confusing maze of Economics and
Divided into two halves composed of crisp chapters
and concise writing with a fair bit of number crunching that mercifully manages
to spare the brain from the trauma of keeping track of impossible mathematics,
Kaul’s Bad Money is never less than engrossing. The reader becomes familiar
with the history of banking as the author details the factors that led to
excessive government control over banking, the assorted variables that led to
the present crisis while skilfully establishing the fragility of financing
positions and the extent of the rot that has set in.
Kaul expresses his disdain for political posturing
and bumbling moves like the populist loan melas that succeeded only in
generating corruption, crony capitalism, partisanship, and fostering financial
irresponsibility. These also failed those they were intended to help. The
author shines a light on an intrinsically flawed system where knowledge is
separated from power and existing enforcement agencies have failed to deter
frauds, leading to the inevitable fallout from bad loans with small time
borrowers who are unable to pay feeling the full weight of the law even as the
big fish swim to greener pastures.
The author makes it clear that the banking system is
in bad shape. Efforts to amend the damage have come undone. Sound solutions
though available are not being implemented since nobody wishes to upset the
status quo which benefits the corrupt. The government which ought to dilute its
stakes in the PSBs would rather pretend to be doing something without actually
doing anything. While this state of affairs persists, the bad money is not
going anywhere. Kaul’s book is brave and brilliant and must be made mandatory
reading for all.
This review originally appeared in The New Indian Express.