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'Last year, Rs 20,000 crore was ripped off from the banking system.'
'The situation has deteriorated under the Modi government.'
When economist Prasenjit Bose filed an RTI plea to know the details of losses and loan frauds that Indian banks have faced in the last 10 years, he was shocked by the Reserve Bank of India's reply.
Bose learnt that the amount of bank frauds had increased from Rs 1,542.8 crore (Rs 15.42 billion) in 2008-2009 to Rs 22,469.6 crore (Rs 224.69 billion) in 2017-2018.
"It is really surprising that there is no crackdown happening on loan frauds," Bose told Rediff.com/ Syed Firdaus Ashraf.
Why did you file this RTI plea?
I asked eight questions related to the state of the banking sector in India.
I did that because I am an economist and I have written extensively on this issue.
I wanted to know about the banks' non-performing assets, the state of the public sector banks and so on.
The RBI replied, stating it did not have the data for most of my queries for the last financial year.
I sought information on NPAs, recoveries, write-offs and wilful defaults.
In many cases they gave me a (Web site) link which I knew was available, but they did not give me the data for 2017-2018 in any of those categories.
The last question in the RTI plea was on loan frauds.
Surprisingly, on loan frauds they gave data till 2017-2018.
This was not public data and was also not available on the RBI Web site.
I had sought the last 10 years data and I was shocked to see the deteriorating figures, which need to be brought into the public domain.
Why are loan frauds happening in our country?
It is a common form of financial fraud.
It is not that it is happening only in India, but all over the world.
These kinds of frauds have now got sophisticated dimensions and it is expected to happen in huge financial dimensions in a country like India.
The problem is that these loan frauds are happening when the banking sector is already under stress.
Already the banks' financial balance sheets are stressed because of the massive buildup of NPAs.
It is really surprising that there is no crackdown happening on loan frauds.
Loan fraud is quite different from NPAs.
Generally, NPAs happen when one takes a loan and fails to repay, but not wilfully, and it is not a criminal act.
It is a business decision that has gone wrong because that particular firm failed in the market.
Therefore, they are unable to repay the loan and that becomes an NPA.
But in the case of a loan fraud, it is criminal intent. Like the Nirav Modi case.
To begin with, the plan was to rip off the public sector banks. And this is not specific to limited public sector banks only.
There is a racket going on and it is too big to ignore.
Last year Rs 20,000 crore (Rs 200 billion) was ripped off from the banking system. This is systemic.
Last year? Are you saying the RTI findings indicate loan frauds are happening under the Modi government as well, and not just the UPA (United Progressive Alliance) government?
Precisely, that is what the data suggests.
Since the publication of this, a lot of people who are favourably disposed towards the Modi government, are making the point that this is the data on detection.
They are saying these loans may have originated under the UPA time, but have been now caught by the Modi government.
That is the official argument. But I feel this is a completely wrong argument.
I have already sent a note to the RBI asking for clarification on this data, asking what is the maturity factor of these (fraudulent) loans.
Did they originate before Modi government's tenure?
I am waiting for an official response from the RBI now.
But if one uses common sense, then you will find out that the RBI had already revised its guideline in 2016 on loan frauds.
It has put in place a series of new measures including very stringent measures, which has been criticised as being kind of anti-business as it makes difficult for businesses to take loans, red-flagging of accounts and early warning system and so forth and so on.
After that, in 2016, the figures of loan frauds are still going up.
What is the loan frauds figure after the 2016 RBI guidelines?
It has crossed Rs 20,000 crore each year after 2016.
From April 2014 to March 2018, Rs 77,000 crore (Rs 770 billion) worth of bank loan frauds took place under the Modi government.
But the Modi government cracks down on economic offences.
I put out in the public domain that the prime minister told a rally in Odisha how he is tackling corruption in the banking sector.
And on Sunday I saw memes on social media on how so many companies have been forced by the government to repay their loans worth Rs 80,000 crores.
There was no source credited to those memes.
Now if a company is repaying a loan, that is not news because the companies have to repay the loan that they take.
The news is when companies do not repay the loan.
Is the Modi government failing to tackle loan fraud?
The situation has deteriorated under the Modi government.
The RBI data states that under the Modi government, Rs 77,000 crore loan frauds have been detected.
The data is not showing when it originated.
What action has been taken after finding out about the Rs 77,000 crore of loan frauds?
That is the question even I am asking!
How many people have been arrested?
How many people have been prosecuted?
There is absolutely no answer. I am waiting for the RBI to respond.
In the Nirav Modi case, the argument was that those loans were taken during the UPA regime -- but it continued under the Modi regime too.
Therefore, you cannot call that a UPA scam only, because the scam was going on under the Modi government too.
The RBI is autonomous. Why bring the Modi government into this?
This is corruption.
This is a crime.
The RBI can be held accountable under regulatory norms and oversight in terms of a banker abiding by the guidelines.
If the corruption is on this scale, then the RBI does not have under them the police, enforcement directorate or vigilance department.
These all come under different ministries of the central government.
The CBI (Central Bureau of Investigation) must get involved because they are probing tax defaulters, and the enforcement directorate must also get into this.
Are there any details about the fraudsters?
No.
I just got one sheet of answer from the RBI.
The Hindustan Times reported that under the UPA, if you see annual figures then the number of loan fraud cases per year was around 2,000.
Under the Modi government the number is more or less the same.
Are these new people or the same old people who are doing loan fraud?
That is the point.
Earlier, there were 10,000 cases and the total amount of loan fraud was Rs 22,000 crore.
Now, from 2014 to 2018 under the Modi government, the loan fraud amount is Rs 77,000 crore.
How come no one knows the names of the people who have done this fraud?
Actually, what it shows is the complete distortion of democracy.
Democracy says every citizen must be treated as equal.
Here, you have the classic case when farmers don't repay their loans, they commit suicide.
If the middle class fails to pay their EMI, their homes and cars get confiscated.
But here corporate groups have taken huge loans which they have not repaid and turned into NPAs.
So many people should have been arrested, but not a single person has been arrested.
Why is the government not disclosing the names of these fraudsters?
There is complete lack of transparency by the Modi government.
The government is busy trying to spin the data by saying they are doing a great job.
Every time someone points out a problem to the Modi government, they are in denial.
They then will go to alt-facts by giving another data which is totally unrelated without responding to this particular data.
They then change the narrative and shift the goal post.
Here every year people are running away with Rs 20,000 crore by doing loan fraud.
Lack of transparency also shows complicity.
It is crony capitalism.
They are big businessmen and they are politically connected people like Nirav Modi and Mehul Choksi so they are being protected by the government.