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Among the many things we take for granted, there is money. We behave as if the system
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of money around us has always been there, as if it is as natural as the oxygen in the
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air. We behave as if a rupee tomorrow will be worth the same as a rupee today. In fact,
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we behave as if the financial system around us is stable and immutable, taking it for
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granted in the same way that we take the circulatory system of our body for granted. We don't think
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about our heart ceaselessly pumping blood until there is a problem with it. And when
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there is, that problem can become life-threatening.
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My subject for today is our on-going banking crisis and my guest is Tamal Bondopadhyay,
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author of the superb book, Pandemonium, The Great Indian Banking Tragedy. India has been
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in a financial crisis for a while now, our banking system is damaged, we have an NPA
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problem, and this whole mess is a structural issue beyond any specific political party
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or government. I've done many episodes on different aspects of this and they'll all
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be linked from the show notes. And if you care about this subject, you must read Pandemonium.
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Tamal is India's most highly regarded banking columnist, he was part of the founding team
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of the newspaper Mint, he has held senior editorial positions in various newspapers
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and he's written a number of exceptional books. Pandemonium is particularly enjoyable because
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it's like many books in one. It features riveting storytelling with colorful tales of wild
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frauds and evocative scenes from Arthur Road Jail. It features incessive analysis in simple
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language that will make you feel like an expert at the end of the book. It features long interviews
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with four ex-central bankers C. Rangarajan, Y. V. Reddy, D. Subbarao and Raghuram Rajan,
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which alone are worth the price of the book for their insights and their self-aware criticism.
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I was delighted when Tamal joined me on the scene and the on-scene. And for me, honestly,
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the most rewarding part of this conversation came before we even started talking about
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banking. Listen in and I'm sure you'll agree with me. But before we get to our conversation,
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let's take a quick commercial break. We live in a world of money and we need to understand
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how it works. I'd like to recommend an online course that will help you do just that. Hop
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and check out a course called Money and Banking, What Everyone Should Know by Michael K. Salemi.
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Over 36 chapters, this course takes you through the origins of money, the history of banks
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You get one month of unlimited free access if you use the following URL, thegreatcoursesplus.com
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free access, what a deal.
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Tomal, welcome to The Scene and the Unseen.
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Thanks Amit. I mean, I'm a bit nervous, but anyway, let's wait.
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Why would you be nervous? We've lived for the last few months with the fear of this
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virus. So why would one worry about a mere podcast? You know, there's a lot I want to
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talk with you about and I've been looking forward to this. But before we start, tell
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me how have the last few months been for you? Like, how have you managed during COVID?
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Yeah, it's not an easy thing because I'm a person who would travel a lot. I mean,
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probably 15 days a month, if not more, not overseas, primarily within India and a bit
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of overseas once in a while. So that's the kind of lifestyle I have been maintaining
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for the last five years, I would say 2014, five, six years when I left my regular job.
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So for a person like me, suddenly confined at home in the second week of March 2020,
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I had my last trip just before the COVID started. And yeah, it was pretty, pretty. I mean, one
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problem was being confined at home and you know, Mumbai homes are not large, you don't
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have garden, you don't have a lot of other luxury, which you could afford probably in
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some parts of Delhi and other metros. At home, me, my wife and a dog, pet. One concern, son
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is overseas, US, and US scenario is pretty bad. He's doing his PhD in economics. So that's
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the worry being a parent was there. And claustrophobia within this know, and most of the time, I
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was confined into my studies, which is a very small place. But on the positive side, I could
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because of the COVID, I could finish my latest book in record time. So I probably work 16
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hours a day, because most of the traveling conversation, everything is over by March.
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So it was to be written and trust you me 150,000 word plus, I pulled out within this between
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March end and August, March, April, May, June, July, six months. So that's the good part
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of it. Bad part of is the confinement claustrophobia and the other part, which is very surreal,
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you know, I have been living in Mumbai with a very small break for a few years from its
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35 years from 1985. I have never seen this Mumbai. Because, you know, I had to take my
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dog out for a walk. So every day that was the ritual, morning ritual for my wife and
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evening for me. And I saw, I mean, I don't know, because of my age, probably some days
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I was in tears. I found crows, dead bodies of crows, pigeons on the streets, probably
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they were not being able to eat. That's what they're dying. And when as things were slightly
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getting better after two or three months of after the pure play lockdown, when it's when
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it started slightly opening up, I found the kids which were essentially earlier used to
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sell balloons on other toys and all they turned bigger. And they are not asking for money.
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They are just pulling my shirt or t shirt or pajama and pointing out some bread or milk
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pouch uncle, you buy this for me. You know, I have never seen this in my life. In Bombay
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when we heard about post partition, what happened from our parents and all. So I mean, it was,
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I was in tears and one particular person, you know, in Bandra, there's a park where
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one person I used to find that every day he was covering his face with a bed cover or
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something that lying there under a tree. I'm talking about March, April, May. And suddenly
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I found that I used to take my dog out in that park. Even though dog is not allowed,
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but those days, you know, we used to take him. And then suddenly one fine day evening
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I found that gentleman was he was singing song, classical music and very tone voice.
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I was very impressed that gentleman. And the next day I found him that he was bowling.
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There was a wicket he fixed up and there were multiple balls he was trying to bowl. And
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my dog picked up one of the balls and he's, he always steals balls whenever he find.
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So then this person spoke in just English, hang on, hang on uncle, don't worry. Let him
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have a ball. I have many balls. Then I got curious. I said, who are you, et cetera, et
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cetera. I found that he was a law student, but, and he was a classical singer as a student
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of that particular Grana. But his hostel is, he was staying in Juhu. His hostel asked him
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not to be there. So he, he came out of this. He didn't know where to go. He managed some
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for night sleep at a church somewhere. And during the day he was in the park from, from
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eight to eight, 12 hours. He was just lying down there. I said, can I do anything for
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you? I mean, in terms of, because it's pretty, pretty close from my house. He said, no, I
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don't need anything. What I need, you can't give me because food is, I'm getting food,
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a free food. I need a place to stay, but you can't give me that. You can give me a place.
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So there's only one story. I don't want to continue for long. So there are many things
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which actually, you know, I don't know. I, I found it, it's very surreal. I, I, I refused
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to believe it, that something can happen. I used to take my car out once in a while
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in the evening. There's a press sticker on my car. So despite being interrogated at various
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places and stopped, they did allow me, but I used to take the car out to get a feel different
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parts of Mumbai in the evening, maybe once a week. And then I found that, you know, roads
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I could not recognize which way to go because everything is empty. So which would drive
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many a time I drove on the wrong lane. You know, and I found those kinds of beggars who
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were not asking for money, but asking for bread and milk and something else for other
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family members, et cetera. I found this gentleman. So it's, it was very, very disturbing. I must
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say you need to really be strong to be yourself. Even after seeing all this, you mentioned
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that you'd heard, you know, similar stories coming from partition times from your parents
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as indeed I have as well. And here's a thought that strikes me and tell me what you think
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about it, which is that there is an invisible city out there that we don't see. And actually
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there are two invisible cities and one is the one that in normal times we don't notice
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it because we have just sort of blocked it away. You know, it could be the beggar at
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the traffic signal or all the people we don't notice and who are invisible to us when we
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are out there. And maybe there's a lot of grief and stuff that we do not notice. And
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that's one kind of invisibility. And I think there's another sort of notional invisible
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city that comes about because many of these people live really precarious lives. And when
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you have one little crisis, one, it's not a little crisis, but even a little crisis
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can just push them over the edge into another existence, which is hovering over them all
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the time, but we don't see it till the crisis comes. Like you spoke about people, the kids
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who would sell balloons and all of that, and they're pointing to a kind of packet of bread.
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So you know, do you feel there's something to this? And after sort of this experience,
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like after the last few months, do you feel you are a changed person in some way in the
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way that you look at the world? Yes, absolutely. I mean, I'm getting very emotional, but I
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do feel as I said, it's very surreal. See, my parents are not from East Bengal, so they
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don't have the first hand experience of this. But I heard from them what happened. We read
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about it. And I'm talking about what I experienced, what I have seen on television channels or
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read in newspapers. I'm not talking about that. I'm not talking about the migrant crisis
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and other, you know, those schemes. But what I saw in Mumbai, in the western suburb of
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Bandra, where many, many years have been living, my first day in Mumbai was in Bandra. And
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in the past 35 years, as I said, barring an interval at many of the lanes I have seen
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in Bandra and the sea face, it's very familiar with me. I've never seen this. So I don't
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know whether this is all along been there. And it was because of COVID, it just, you
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know, spilled over to our, I would say, in our consciousness, it was in the subconscious.
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I mean, I'm talking about philosophically. Or it's been there, we don't notice because
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there are people, you know, at the traffic signals, there's balloon mallas, or somebody
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selling a box of figs, or the books, etc, etc. Actually, they lead this kind of life.
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And because of COVID, that life, the wave of their life just got into our seashore.
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I don't know. But it is very difficult. You know, there have been occasions where somebody
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just got hold of me, at least there are twice it happened, two persons got hold of me on
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my left wrist, and with very strong thing, and asking for something, he said, I have
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not eaten, you have to get something for me. And in one case, I got little paranoid that
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easier sort of really like, use his dagger or something and kill me. In a gully, he put
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me there within Bandra. And then he said, in English, he said, you come on, don't get
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nervous, you come on. And then in within the gully, etc. He took me to a biryani stall.
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There are other biryani stalls also on the road, but this biryani stalls, I was not aware
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of it. And it is better than the other biryanis. And he said, Can you buy a biryani for me?
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So 150 rupees I paid, and I got a biryani from there. So I have never seen, you know,
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I would not call them aggressive, you know, it's not aggression. It is just like you,
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you hold on to a straw when you are drowning. So he was making a last ditch attempt just
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probably he has not eaten for a few days. That here is a man with his dog, probably
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well off, he can afford, why not? So I didn't have the money. So I, I told the biryani seller,
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this is my mobile number, you check it out, I'll come back and pay you the money. So that's
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how it happened. So yes, my my approach to life has changed. Now, how long it will last,
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I don't know. Like for instance, many years back, I went to a yoga ashram and stayed for
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10 days. And next three months, I was a little different person. I used to get up pretty
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early and seeing things in a different way. I'm not comparing that. But then as I got
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into the normal routine life, no, it started wearing off. So will this COVID impact also
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a year or two down the line will wear off and I will become the same old person? Or
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will it forever stay with me? I do not know. But as we speak, definitely, I am not the
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same person which who was had you spoken to me one year before, my approach to life things
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surrounding me, definitely different than what I am today.
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And another sort of thought which strikes me which is also a surreal aspect since you
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mentioned that word is that on the one hand, you're going out walking your dog and you're
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going driving and you're seeing all these things which you know, one would not otherwise
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notice or one would or it would otherwise not be like this. At the same time, you're
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writing a book, which is about just another kind of reality there. And the thing is, I
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often find it hard as a writer on these subjects on economics or public policy to really drive
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home that connection where I say that, listen, bad economics has humanitarian consequences,
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that all of these things are related. And in your book, you've written about, you know,
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there are so many concepts in your book. And all of those concepts, in a way, play back
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to this reality that you're seeing on the streets. But that connection can sometimes
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be hard to make. And of course, the real people that you write about in your book, you know,
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including the Nirav Modi's and the Vijay Mallyas and all of that are just at a different
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sort of level. Is that connection something that even you have to keep reminding yourself
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of the real consequences of some of these bad policies that you're writing about, that
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this is not happening in some artificial universe, all the things happening in banking, but they
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Honestly, no, no, I don't have that kind of, you call it, I don't have the missionary
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zeal of, you know, telling the world, look, this is underneath is this, it's not like
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that. As an author, I always want to tell a story. And now my last book, which you mentioned
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this pandemonium is different because it has a much larger canvas, the pandemonium, what
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we have been witnessing in Indian banking system. Earlier, this is my six books, earlier
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five books, primarily one was the collection of essays, which, and the rest four was sort
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of biographical on institutions, good, bad, ugly, on shadow banking, on India's finest
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bank, on a microfinance entity, etc. Now this time it's very different because the canvas
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was very large, there are constituents were many, and I tried to take a deep dive kind
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of thing, what has gone wrong, and how and why and what the basic W principles of journalism.
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But I not consciously or unconsciously, I have been trying to relate that and the real
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world and we are paying the price for being, you know, not following the governance, etc.
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in that the world of economics and finance are not. As an author, my simple logic is
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I want to tell a story. And my advantage is probably I'm fairly illiterate about finance
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and economics, because I don't have any kind of background. Once you have that background,
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then you go through that prism, you know, that theory, I have read this and this Nobel
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Laureate has said that and somebody has said that. I don't go through that. I don't have
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that baggage of knowledge, if I may put it so, you know, so I am like a mountaineer.
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I know that I need to carry minimum things, only the oxygen cylinder and a bit of chocolate
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and those kind of things. And then what I see what I feel, that's all. So no, I do connect
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the micro and macro. I do try to read between the lines. But my overarching ambition and
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the mission is to tell a story. And that story should be read by everybody. If I say it must
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be read by your aunt, and she should appreciate you, you will hang me for my gender bias.
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So let me say your teenage boy would be able to read and understand. So that's the overarching
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philosophy for every book I follow. And this book also same thing, just telling a story.
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That's actually what you what you said about your aunt or an eight year old boy is very
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resonant with me because I teach an online course, where one of my slides is about what
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I call the Naniji test, where I say that if you're writing an op-ed or an article, show
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it to your Naniji or a young teenager. And if they don't read it all the way through,
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you're doing something wrong. It's your fault. It's not their fault. And obviously, I'm not
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condescending to either Nanijis or teenagers. But the idea is that an intelligent lay person
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should be able to understand it. And I think this test also helps you avoid what people
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call the curse of knowledge or what you call the baggage of too much knowledge in a sense.
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So you know, before we sort of get back to where you started and all of that, which I
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want to get to a related question on this point that strikes me, which is that another
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thing I say in my writing class and with George Orwell as well used to wrote about in a famous
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essay called Politics in the English Language is that the pressure to write clearly makes
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you think clearly, makes you think deeper, because it's actually quite easy to write
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about something using jargon and obfuscatory language and abstract concepts. But when you
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put on yourself the pressure to write clearly in simple language that anyone can understand,
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then that means you have to understand the subject that much better and go to its root
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and all of that, which shines through in your writing. I mean, this book was such a lovely
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read and a lovely piece of storytelling. And I'll come back to that as well. But is that
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something that you have found that because you have given yourself this mandate, and
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not everybody in business papers or all the places where you work necessarily writes this
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much clearly, but because you are forcing yourself to ask basic questions, not worrying
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about looking stupid, to ask simple questions and to, you know, simplify it for the reader.
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Do you feel that that's also helped your knowledge of whatever it is you're writing about?
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Absolutely. I mean, you have hit the nail. I think, as I said, my advantage is, I don't
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have the background necessary to be a finance writer. But that actually encourages me to
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ask stupid questions. Well, I don't know. So there are a few principles which I follow
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while writing my column writing used to those days news reports, when I was a reporter and
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now a column and books. A, if my writing is only appreciated by the bankers at the community
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of the financial sector people, then I'm a complete failure. People of other professions
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should read the teachers, the doctors, the students who read and appreciate. So I must
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have a much larger base of people. So that's that's one part. Second part is the the element
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of storytelling that remains also in the in my column also, you know, that connecting
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the dots the connecting micro and macro, those are the kind of stuff. And third, the most
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it is by default, probably I do this, because as I said, I don't know. Basic thing is this
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most of the subjects, I just don't know. So what I asked stupid questions, I end up reading
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a lot of things. And then I'm not embarrassed to ask whether it's RBI governor or finance
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ministry officials, bureaucrats or bankers. Boss, just explain to me. I don't understand.
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Can you please explain to me? And they are kind enough because they also probably take
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pity on me that this person is trying to understand why not. So I actually they play the role
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of teachers and at various stage of my career, I've got various people who have been continuously
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playing the role of teacher or interpreter or whatever you call it. So explaining things
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even today as we speak on anything, I have multiple people at different India and overseas,
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I can reach out and I just say that and they're all eminent people, very knowledgeable people
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and they have the fundamental background of economics and finance. I just tell them just
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can you explain to me why? And till such time, I am convinced I don't want to write it. So
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that's all. If something happened, Reserve Bank of India cut rate or has raised rates
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or something else happened. What does it mean for me? I mean, only by saying this, it doesn't
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make any sense. It starts from there. And then as I said, however difficult the subject
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is, and even the easiest subject also I can't understand. This is not my modesty. This is
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just because I don't have the background, right kind of background and things are evolving
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in particularly in finance. Just to be there, you need to run, you know, because globally
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things are happening so fast. So I have multiple teachers at multiple geographies for multiple
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subjects and I am not embarrassed to expose myself. I tell them that look, please explain
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to me. And which is why probably an intelligent person and a person with a background, probably
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what would take one hour, I may end up taking four hours, four times more. But that's the
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No, that's that's very inspiring. And I'm going to take a brief digression for my listeners
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and point out that, you know, while Tamal has said that he doesn't write for the banking
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community only and he wants everyone to read him. The fact of the matter is that all the
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journalists that I have spoken to that, you know, who have ever mentioned you in conversation
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and all the bankers whom I've heard talking about you have nothing but the highest respect
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for your work, you know, which is a tribute both to clear writing and intellectual humility.
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However, now turning back back to Tamal, I've got to tell you that in today's episode, you
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are going to be on the receiving end of stupid questions because this is a subject which
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I'm treating you as the expert in and I am going to ask a bunch of simple questions and
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get you to simplify it. But you know, before we get to the subject, I'd like to know a
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little bit more about you. One of the things that I was fascinated by at the start of the
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book is when you mentioned where the title of pandemonium comes from, which of course
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comes from Milton's Paradise Lost. And then I looked you up a bit more and I realized
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that you have a master's degree in English literature from Calcutta University. You enjoy
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reading a lot. And in fact, throughout your book, there are other references that, you
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know, show that you don't fit the stereotype of a financial journalist whose head is in
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finance all the time. You are imbibing culture, whether it's music or writing and all of that
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in different ways. So tell me a bit about, you know, what kind of a young person were
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you growing up? What were your influences? What did you want to be? You know, obviously
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a significant part of your love of storytelling comes from, I presume comes from your love
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of literature. But so tell me a bit about, you know, you before you become a financial
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Well, you'll be disappointed. Actually, I don't have any interesting background. I come
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from a mofasal town, which is 110 kilometers away from Kolkata, a place called Medinipur.
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They call it Midnapur under the British regime, where that Kudiram, the martyr, etc, etc,
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was there. And from a yeah, I mean, it'll be a charitable way of calling ourselves a
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middle class family because we could eat rice both the times because those days I'm talking
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about 60s. My uncle's family used to eat chapati at night because they couldn't afford
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rice was more expensive than atta. We had rice both the occasions and not every Sunday's
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but some Sundays, mutton curry being all a typical thing and focus on studies. That was
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the kind of stuff there. This we used to sit on the floor and eat our dinner and used to
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talk about cricket. Mansoor Ali Khan Pataudi was the I think India's captain there and
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multiple other things. So it was a very and there is no what you read know that middle
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class Bengalis will be on every summer vacation. They will take a long distance train and go
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on a holiday and buy books from wheeler stalls. It is not like that. I was the youngest and
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by the time I was in high school, my father retired. So and I was of the four, the youngest
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one. So I was never pampered. Typically, youngest child is pampered. I was never pampered. Yeah,
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that was the thing I was not. But yeah, there was passion to read. One of the ways of reading
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is you know, was those days in West Bengal, there's a lot of cultural competitions. So
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the so called extracurricular activities and used to get prizes books. We can't afford
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to buy books even for my regular school books. We never got new books we could not buy because
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financial and not that as I said that scenario. I was not exactly a brilliant brilliant student
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but I manage free school free students if both college school etc. So one of the ways
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of getting those books to read which you would like to read is to get into the competition
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and win the awards. So that's how at a very, very I think from probably age of five or
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six or seven I started doing that, which is recitation, eloquence, debate, essay writing,
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writing poems, short stories, even drama. You know, I started acting at a very young
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age then directing also. And all along in my school, college, university, I was the
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cultural blue, getting all the awards not in music but that so that was one side of
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it. And so that opens a door and that also makes you sort of independent, I would say
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not what do you want to do you want to do not others what they are doing it. But those
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days when you study English literature, and not an extraordinarily brilliant career, there
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are options to one is you become the big go for civil service or you go for teaching.
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That was the standard thing. I was also toying with those kinds of ideas. And then and then
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a series of accidents started. In the sense, somebody saw Times of India ad looking for
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apprentice journalists, trainee journalists, through a series of tests, etc. One could
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go there. So somebody saw that advertisement in statesman and said, why don't you apply
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and try that. So we had some tests, etc, etc. The final tests in Mumbai, and coming to Mumbai
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by Gitanjali 32 hours, I had nobody in Bombay, I got out of the VT station from the end where
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that GPO and then I had I remember I had a butter Northstar shoe, a brown color, I got
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it polished. And with the smartness, I got into a taxi to take me to Times of India,
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which was a one minute walk just across the road. And the taxi guy looked at me. And then
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he took me to the Reserve Bank of India, saw it Bhagat Singh Mark turn right, turn right,
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and then came back on the DN road and dropped me at the Times of India. I gave my test,
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etc. And then to cut a long story short, I got in there. So it's purely by by accident,
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I became a journalist, I saw all these guys on typewriter facing the wall and doing I
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thought, Oh God, it's all the full of typewriters. Where are the journalists? That's how I came.
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And then a few years I were there doing writing stories, book reviews, film reviews, alcoholic
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anonymous and narcotic anonymous, nothing to do with finance. So first accident becoming
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a journalist second as a real accident. My father had an accident, which was pretty fatal.
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He did survive for a few years. And then I took a call that I must go back to Kolkata.
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But Kolkata Times of India did not have any kind of vacancies. So I was put in Economic
#
Times desk. And that's how I was introduced to steel and tea. And you know, those are
#
the kind of things jute in Kolkata. Those are the kind of stuff. I didn't like it much.
#
I was not enjoying so I was writing illustrated weekly because so little money you get to
#
survive you, you need to do a little more. And one of the ways was the writing and illustrate
#
weekly already I started writing in Bombay. So I used to I was married but hardly at home.
#
I was doing night shifts in office and during daytime I was all over West Bengal doing stories
#
for illustrated weeklies. So that's how and then by then I from shifted to cut a long
#
story short into another paper. And they put me into feature writing and then they asked
#
me into writing of those days trade unions were very active in West Bengal. So why don't
#
you try trade union and through trade union made I think 94 I smell banking because the
#
two biggest trade unions AIBA for employees and AIBOC for officers both were in Kolkata
#
and they are very powerful. I still remember Tarakesh Chakraborty was the AIBA general
#
secretary on his table there a trophy which is Air India or Indian Airlines flight because
#
he used to spend the maximum number of hours in a year in the sky. So he used to get that
#
those days no frequent flyer the whatever the longest time in the sky that kind of thing
#
and his people are there everywhere in every bank. So and he used to share with me from
#
his Godrej Almira he will open up all those you know papers and all. And as I said I didn't
#
understand so I used to figure out how to appreciate things how to know things. That's
#
how I was in mid 90s post liberalization and all the banking rules etc changing I was introduced
#
and then I came back to Bombay. That's how I got into banking and then from a reporter
#
so every everything as I said by accident then from there into book writing also I got
#
into accident somebody once the publisher approached me he wanted to get a book on something
#
and that's how I got in there. And then now I am I have one foot in in the industry as
#
an advisor etc with the entities again like by accident. So nothing has been planned to
#
answer your question that did I actually prepare myself for this entire innings no I just gone
#
into the flow and I believe one is you must enjoy what you do so I enjoy what I do and
#
then I find ways how to do it good. And second part of is this I think it sounds a cliche
#
but the actual learning happens outside the classroom. So use you said I am a student
#
of English literature that bearing is there at the background that helps me to understand
#
things in a different way in the context and all. But all the other things I just pick
#
up as I move even today. So it may sound little pseudo modesty that if I say I'm a student
#
but I am a student and I mean it. Fascinating there are many strands I'd like to pick up
#
but first of all I should mention that I got a warm glow when you mentioned that thing
#
about getting books as a prize because my father who grew up in Calcutta and is 20 years
#
older than you he was born in 1941 and he's mentioned how during his students years they
#
would give books as prizes for everything and he would try to just win books all the
#
time and I wonder if that's something kind of uniquely Bengali in the sense that immediately
#
there is that appreciation of books and knowledge and all of that which is kind of coming from
#
there and it also strikes me that that something like that is not possible today because books
#
are so much more accessible which is wonderful but does that also mean that we value them
#
less I would hope not. But moving on to sort of your growing up years again before we get
#
to your journalism what were the sort of kind of books that you read what were the writers
#
that you read like I'm sort of trying to understand that when you begin this journey of yours
#
as a journalist who are your influences do you think that oh I should write like this
#
or like that or like that are you actually thinking of sort of writing as you're calling
#
or are you just by accident as you said you came into journalism and you know how to write
#
so it fits well what were those kind of early influences what was your view of the world
#
at that time? No not really if you want me to articulate answer I have to figure out
#
what to answer but if you want me to honest no absolutely I don't think there was any
#
role model before me and also while reading like in school and college days I devoured
#
everything which come on my way it could be even adult books in fact my father often caught
#
me on reading books which I should not have read and I did not know that like Lady Chatterley's
#
Lover I wrote I read and then some of the Bengali things which is in school seven eight
#
standard school in fact in school library I used to also ask for those kind of books
#
and they of course did say no and that made me more curious then I found out how to get
#
those books so I was pretty indiscriminate what I read I mean it was mostly in Bengali
#
a bit of in English because I came from a Bengali I was not into English medium school
#
etc right so you'll be disappointed to hear that so it is mostly Bengali and then of course
#
English also because in my family there are my brother is an into civil service and teaching
#
is English PhD etc etc so there are room full of books in English also so I was pretty indiscriminate
#
whatever I used I used to devour that's the school college university days and when I
#
became a journalist I don't sometime I consciously don't read I don't want to get influenced
#
by somebody's style etc and here if you ask me actually I read less I read less in the
#
last 30 years odd what I read is primarily I read for information what comes on my way
#
because need to be abreast and all so I last 25 years I would say 1994-95 I started into
#
this financial sector so one area of reading is primarily to get to know things it's information
#
for information and other part is just to be in conversation you know one book is like
#
everybody talks about it you have to join the conversation so you better read it and
#
third is somebody said have you read this like for instance firefighting you know by
#
Getner and three of them they're brought did I read it during this crisis financial sector
#
crisis alignment crisis no firefighting I wrote sometime back because somebody said
#
have you seen firefighting there's a lovely segment of charts I thought okay why not in
#
my book I can incorporate those charts those kind of charts then I read firefighting during
#
the COVID time before starting my book and then I actually stole the idea of getting
#
the charts as a chapter from there so this just to give an example right now I am I am
#
reading a book is code name God which has nothing to do you know by Moni Bhoomik who
#
is that famous physicist who is the discoverer of LASIK eye surgery somebody said have you
#
read it because when I was talking about look COVID is makes me depressed I want to understand
#
you know not philosophically the meaning of life etc but slightly I want to understand
#
things I am slightly getting you know disturbed not sleeping well is that you read Moni Bhoomik's
#
code name God he was a famous physicist he was the one of the richest Indian probably
#
the most richest Indian in US you will find some answer to your question so I am reading
#
it now I am finding it difficult because it's physics theories etc etc so I am slowly slowly
#
reading it so that's it so there are four five types of book but I never read any book
#
consciously to model by writing on them and neither have anybody who I and I admire many
#
for their writings but I want to write like that kind of that person or that book no I
#
actually stay away from this yeah and I also want to ask you about something which is not
#
related to the subject of your book directly but like a final question on your personal
#
journey before we get to your books and the subject of your book which is you just and
#
I've been noticing that while you've been telling me all these stories you've been bringing
#
in all these concrete details like somebody took something out from a Godrej Almira and
#
all of that which is wonderful and evocative and I'd like you also mentioned that when
#
you first entered the Times of India office there's a row of people typing away on typewriters
#
yes and sometimes when I look back like I started working in the mid 1990s and I remember
#
when I was in my first job in advertising in 94 I was just for a few months in what
#
was then India's largest advertising agency and there were two or three computers on my
#
floor which was a massive you know so you had to write things by hand and it was just
#
the whole thing was a very complex process everybody would be fighting to get to the
#
computers there was no MS word there was a thing called wordstar so just in terms of
#
technology and workflows everything is different and how everything is also different in the
#
modern age is that today everything is immediate right today the news cycle is so compressed
#
that there is no scope to go deep everybody is just catering to the hunger for instant
#
information the instant hot take and all of that and I understand it's not like journalism
#
was particularly deep back in the day in the 90s you know I've had friends who worked in
#
newspapers saying yeah it's like every day I have to do one story how can I go deep but
#
having sort of you know built your career in those times and then continued through
#
these times what was your process as a journalist like in those days like how would you do stories
#
what is the approach that you would take what is the approach that your editors would take
#
and how much has it changed and what is your view of these changes definitely say if I
#
split my career you know I would not take the first 10 years as I said I was floating
#
into feature writing doing other things and all so I got into serious reporting 94 and
#
95 I would say Bombay back to Bombay after my little bit of innings in Kolkata and all
#
so they are the focus always you know on on exclusivity so you need to you need to get
#
exclusive stories you know one one newspaper is appreciated or read and talked about is
#
the kind of exclusive stories and to be honest I was pretty good at doing exclusive stories
#
and there are two parts of it how you get a story and how you write it I think how you
#
get a story is true for everything you know whether you are covering Bombay municipal
#
corporation or assembly or anything else so it's basically I find it very interesting
#
it's a psychological game you know you need to figure out who will give you in every organization
#
there are you know there are people who can just flaunt without being aware of it and
#
giving you a story there are people who are actually anti-establishment want to give you
#
some story there are people who is aggrieved for certain reasons want to give you a story
#
every person has a vested interest you know somebody wants to prop up the company somebody
#
wants to downgrade the company somebody just for the zeal something else so it's a psychological
#
game you need to get a story I was pretty good at just to give one example a CEO of
#
financial institution I found it extremely difficult to get cracking and then one fine
#
morning somehow I managed an invitation for a cup of tea in his house and there I found
#
on all the walls there are big photographs of cat so I said who is this this is my daughter
#
in law and she is from US and she can't follow local language you have to speak in English
#
and then she called a cat Maya her name M-A-Y-A Maya Maya this girl a big cat comes jumps
#
onto his lap and all that cat was stuck in a lift in some US someplace his son was there
#
and he exported it to India that's all the thing incidentally I am also cat lover and
#
dog lover so we had a conversation and we struck a friendship like that and then news
#
flow started he can empathize with me he can found this another person who actually loves
#
Maya like me and that's how our friendship started and till the time that person was
#
in office it was just the story was a call away because I was a great cat lover and genuinely
#
so and I loved this cat and I used to frequent his house only for that Maya so the point
#
I am making it was exclusivity and how you get it you can't be trained it's a psychological
#
game you know you need to figure out who is the person and what is the switch it's just
#
like making love how Maya was his switch somebody else's switch could be different I mean you
#
need to talk probably his son who is in overseas and praise the son how good is he and that's
#
how the ice melts or something else you talk about you don't talk about nicely about some
#
politicians and you get him on this thing you can be little pseudo not exactly sincere
#
as long as they are not doing any harm it's a psychological play so the focus has been
#
in the 90s etc I am talking about is the exclusivity and then two things happen I think as we move
#
forward one is this exclusivity is yes but because of the rules regulations say be etc
#
etc that flow of exclusivity will be much less because the person who is giving the
#
story away could be you know in trouble so on and so for the exclusive the flow will
#
slightly dry up not entire thing but some so then two things happen one is the competition
#
with other medium first with television channel and now with all the internet things and all
#
so that how fast you are it's the fastest finger fast no more exclusivity is the information
#
information information that's all the so I would like to think bulk of the energy of
#
the of the journalists now irrespective of which platform you are on you are on your
#
high alert how fast fastest finger fast not exclusivity at all exclusivity and second
#
part that will happen at the cost of this thing exclusivity is now in terms of percentage
#
of entire thing the pie chart will be much less but how fast you are and second is the
#
interpretation I think because news is a commodity and I can get it on my mobile on a real time
#
basis I really don't care much for information but I care for interpretation so the second
#
part is this is the how you interpret things you know that's very critical I think the
#
the opinion writers and commentators are much more appreciated today than they were much
#
before is this because well I get the information so fast but I want to understand what does
#
it mean and so you need to tell the story in a different way than what it was I think
#
it's it's still unfolding I'm not getting into a thing which media and no more an intermediary
#
you start taking sides and the views and news getting merged particularly on television
#
I'm not getting into that segment at all I'm just telling you a pure plain news I think
#
premium on exclusivity still continues but they are not everything one prong in the entire
#
plays how fast you can churn out fastest finger first because you are competing different
#
models are competing and other is more than the news also the not the views the interpretations
#
and etc. so these are the newer things which it's still unfolding and of course the other
#
side of it is of course you get carried away and then you you have a view and views overtake
#
the news the the borderline between views and news are getting blurred that's a different
#
debate altogether all of this is really fascinating I have a couple of quick sort of sides which
#
will lead to a question and the first aside is a little bit a trivial you spoke of exclusiveness
#
I remember I was a cricket journalist in the early 2000s and there was a legendary gentleman
#
who was a writer for the telegraph the Calcutta paper and he used to boast about how Imran
#
Khan has given him a thousand interviews and no one else has interviewed Imran Khan more
#
and then I remember one day while we were on tour you know going online and seeing one
#
of his reports and there was a line in it which said speaking exclusively to the telegraph
#
Imran Khan said no comment so that's I don't know what to name that person but I know who
#
are you talking about yeah okay and the other point that also strikes me is an observation
#
from my cricketing days and this is something that my listeners might be interested to know
#
also is that there was this very interesting shift that happened shortly before the time
#
that I started writing and part of the I of course used to work at Wizard and Cricket
#
4 but I also wrote for the Guardian for a point in time and the British papers at one
#
point in time realized that they have to change their cricket coverage because what would happen
#
is like you said information became a commodity you know earlier in the 60s and 70s you might
#
pick up the newspaper to find out what happened in the match but by the late 90s and 2000s
#
you know what happened in the match it happened on television you might have seen it live
#
so the cricket report cannot give the bare facts so therefore a good cricket report would
#
have some color it would have some perspective like you said some interpretation it would
#
be a little deeper it would be different you had to do that and like when I was at Cricket
#
4 we kind of covered everything we had a bulletin which was just the information we used to
#
give a verdict which was you know somebody's stake on what happened we had color pieces
#
all of that is interesting now coming to the interpretive aspect of it you know you've
#
mentioned that when you first got into financial journalism you knew nothing about finance
#
so what you're really doing is even now I don't agree with that Tamilda but I think
#
I think what would therefore have happened is that you were asking simple questions stupid
#
questions just getting the basic dope now obviously you mature in the business you know
#
a little bit more than you're getting interpretive one what kind of lenses do you then form to
#
look at that world and two does it then become something at the back of your mind that if
#
I express a view that so-and-so say governor of the RBI may not like I might lose access
#
or I might whatever is that a trade-off that you have to play with no absolutely not I
#
don't agree with that see when I started in bank reporting I was in the 90s banking
#
was a very esoteric subject there are not too many bank reporters were there and I remember
#
in Kolkata my newspaper editor will come to interview dr. Rangarajan who was the governor
#
he would fly down do the interview come back and the previous 24 hours you know there has
#
to be like pinned up silence near his cabinet set is preparing is preparing to meet governor
#
kind of thing or somebody is writing on credit policy sitting in Kolkata you know don't don't
#
make sound that was the kind of culture was there it was very esoteric subject and as
#
a reader I would read and I will not understand also even after all this kind of things so
#
as I said then things change generally things change more and more people are getting into
#
this and that you know you actually start throwing stones at their glass house and you
#
demystify things and come here and then you do things in a different way you interpret
#
now I would say it's very important to convince the other side that you don't have any agenda
#
like I might be going wrong you know not that every interpretation is correct and I am accepting
#
that I can't be the know-all person so sometimes I go wrong I think it's not only my acceptance
#
but the other sides also need to know that well this fellow does not have any agenda
#
he doesn't have any vested interest but this one case he has gone wrong so probably I will
#
pick him I will call him and say that if it happens with me people say that why you have
#
gone wrong I said yes please I mean because my teacher probably not said in most of the
#
cases I do and not one teacher I do also multiply check because to understand things better
#
and to make it as impersonal objectives as possible so I think if the institutions or
#
the persons who are involved in that news if they are pretty certain that what happened
#
a yes genuinely this is a mistake I have but I have no vested interest so they will not
#
shut the door for me and be certain things happen is this there is something really happened
#
and this is not a very pleasant story for the organization per se and but I have written
#
it and it's correct so if you are a professional you would not mind this to give an example
#
I don't name it's about a large bank post Liban I wrote a story and it's came on mint
#
those days on a big way on the page one this bank had massive liquidity problem and that
#
bank borrowed money from overseas it's a private bank it borrowed money from Indian bank from
#
his overseas operations and at a very high interest rate so I gave a graphic ball by
#
ball commentary I had everything on and that this particular bank stock was hammered probably
#
twenty odd percent or if more it fell down the entire day the CEO had to spend on television
#
different television channels explain to people that what exactly happened there are almost
#
a run on the bank and Reza Bank of India actually had issued a note also if I remember it correctly
#
in the evening that everything is fine with the bank I was also interviewed on various
#
channels and I was asked that how bad is the scenario I said no the bank is fine there
#
should not be any concern about deposit money etc etc etc but it was an extremely negative
#
story as far as the bank is concerned but did I lose my contact connectivity and the
#
relationship with the CEO and etc no definitely not they are pretty upset but I think a few
#
months down the line on my event because I used to run event even now the current paper
#
I do the CEO attended because the CEO knew that I had no vested interest just I had played
#
a journalist job and probably had that information gone into somebody else the treatment of it
#
probably could have been different so I think as long as you can convince them that you
#
are not irresponsible if I am responsible and ethical I think they will give me a chance
#
if I go wrong at times in this case I did not go wrong so even if it's I am writing
#
stories which not exactly suits their purpose or even if I have gone wrong sometime but
#
there's a genuine mistake I think my doors will not be closed as long as I follow this
#
basic principle of ethics and as I said irresponsibility they'll recognize that it's in good faith
#
it's good to know the banking world is like that because back when I was a cricket journalist
#
the cricket world wasn't exactly like that if you my experience yeah yeah I'm not saying
#
that this is the rule but my experience is this no I mean and I think it's a model for
#
every journalist I just try to write in good faith and to cover every angle and I think
#
people will appreciate that my other question you know before we get to your book relates
#
to something that you've actually opened your book with where you talk about how it's
#
like Rashomon in the sense that there are these multiple points of view from different
#
there is this complexity and I think you've done an amazing job sort of capturing so much
#
of that at the end of the book I obviously knew a lot more about the subject than I did
#
before which is next to nothing but I still didn't exactly know where you're coming from
#
which is a good thing that you haven't put too much of your opinions on it now my thing
#
is that you know another metaphor one can use for a complicated subject is that old
#
proverb about different blind people describing an elephant by touching different parts right
#
and it strikes me that whenever we learn a new subject and it's certainly been the case
#
with me that whenever you learn a new subject you begin from one vantage point maybe you
#
read a book on the subject or there is a received wisdom on the subject and you begin with that
#
and that's your view to start with and of course you're open and finding out more but
#
over a period of time you'll get another view and then another view and then another view
#
and gradually you begin to see the whole elephant as it were so have you felt through your career
#
sort of your views evolving in this way and getting richer as you go along so you see
#
more of the big picture absolutely I think one is this a I follow one basic principle
#
is this I can go wrong so I am open to ideas I am not rigid at all I don't have the last
#
word on anything and this is because of my handicap I don't have the as I said the background
#
of of the academic background or understanding theory etc etc so one basic principle is this
#
I don't know everything I can go wrong I am flexible in my approach and second is of course
#
as we grow intellectually professionally biologically as we know more people more doors get open
#
so you are interacting with more people and that's how it happens you know and I there
#
as I said I don't read too many books but I continuously I am in touch with people and
#
I find that if I can spend a meaningful time half an hour one hour with an important person
#
and get to know things this is far better than reading two books on that particular
#
subject you know provided you have an honest conversation the person is not taking you
#
for a ride I think that's that's the case it's a it's a very nothing is absolute right
#
no it's a very layered truth is very layered even in financial sector I know yes interest
#
is going up going down or that's a separate story altogether what's happening in the bond
#
prices and all but if you see the overall scenario it's pretty complex it's pretty layered
#
and how you look at it different constituents look at it different way if you are a banker
#
you are looking at it if you are a customer you are looking for a different way if you
#
are a government which is the owner of the banking by a large part of the bank is looks
#
at a different way if you are an investors if I look look a different way now the most
#
bank which is the investors are very happy the customers not necessarily very happy so
#
there are ways of looking things and so we need to I think as a journalist what I believe
#
is this to reach out to as many people as possible and a different constituencies you
#
know different constituents of people to get a 360 degree angle of what's happening so
#
you have to have a long shot and at the same time you need to also have a granular details
#
to write the story so fly on the wall I think the challenge is how do you combine that too
#
you know one is this you have to have a solid grip over the entire thing you know what is
#
happening and the multi-layered perspectives and other is the granular details as if you
#
are present there so in all my books I try to whenever things come I try to be that you
#
know so that's where I think it's all again the same I think I'm repeating myself it's
#
a part of the storytelling how do you approach things wonderful let's take a quick commercial
#
break now and at the end of it after the commercial break rather we'll come back to talking about
#
pandemonium okay thank you on the scene and the unseen I often speak about positive some
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that's right unseen for 15% off at Indian colors dot com welcome back to the scene in
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the unseen and I'm chatting with Amal Bandopadhyay about his wonderful book pandemonium let's
#
talk about this book now because your previous books are all like about one subject so you
#
know whether it's the Lehman Brothers crisis what happened after that or HDFC or Sahara
#
they're all about one subject but here you've not only you know taken a really broad canvas
#
but what I found fascinating was you've taken different approaches to the storytelling where
#
there's a lot of analysis there's a lot of straight up storytelling there are those interviews
#
with the four former governors of the RBI and there's a chapter with charts where you're
#
kind of making those charts speak for themselves and be so revelatory so was this a conscious
#
decision because you felt that there was so much content that you couldn't contain it
#
with one approach you had to do all of these things no because as I said there is no straight
#
answer to the crisis what led to the crisis if you allow me actually what led to the writing
#
of the book also then you I can I'll be able to explain to you better it's in October I
#
think 15th October our finance minister Mr. Sir Malasikta Raman attended in US in one
#
of the meeting you know there was a moderated discussion Arvind Panagariya was moderator
#
and she explained India's dream of becoming a five trillion economy and then there are
#
some question answer sessions so one of the gentleman were present there asked a question
#
referring to a speech of Raghuram Rajan and saying that Dr. Rajan feel that two centralized
#
regime the power structure in India is responsible for economy not been able to attend its potential
#
growth no madam do you agree with that and she was I think quite taken aback with this
#
question she said can you repeat again and the gentleman repeated the question and then
#
she took her long answer essentially she said that I have respect for Dr. Rajan you are
#
referring to Dr. Rajan's comment but do you know that during Dr. Rajan's time it's Dr.
#
Rajan and Dr. Manmohan Singh for the public sector banking industry that was the worst
#
time in India etc etc and somebody was present on a real time called me in India that Tamal
#
you have been following this industry for quite some time do you agree with that assessment
#
that it's Rajan and Manmohan Singh they are the villains of the peace and that set the
#
ball rolling that I said that question can actually lead to a book and Roli publisher
#
Kapil also had an idea of catching the big picture of that so that was the origin and
#
because there is no straight answer there are multiple answer how did we get into the
#
mess is it the 90s the death of development financial institutions and conversion of the
#
banking our banks into universal banks and they started giving project loan also which
#
they are not very comfortable they only knew or even now they know only working capital
#
loans giving so is it the reason for this that kind of mess or during Dr. Reddy's regime
#
between 2006 and eight the three years when India economy was growing nine percent plus
#
credit growth was more than three times or three times of the GDP growth inflation was
#
low so those are the years of irrational exuberance did that so that seats up the problem or is
#
it during Subbarao's regime post Lehman crisis the ultra loose monetary policy and he was
#
pretty slow in unwinding he was taking baby steps and that's how we got the very high
#
inflation etc etc so is it the root of the problem is this or Dr. Raghuram Rajan was
#
he over aggressive in cleaning up the system so there are multiple questions you know there
#
is no there is only not only one question and there are various ways of looking things
#
in different parts like public sector banking industry there is a problem is the private
#
sector entirely we know is a gold standard no you have yes bank and then problem with
#
ICICI bank also you have problem with the rating agencies they have not come out in
#
the best of color during this time you have problem with the non-banking financial system
#
and then you have reserve bank of India's war against NPA and then RBI's inspection
#
and supervision also you know there are many questions unanswered why they took so long
#
to discover what's happening in his bank and all so there were multiple questions and there
#
were the truth has many layers so obviously I needed to take a look through different
#
lenses but as I said I wanted to combine the micro and macro I wanted to give a 360 degree
#
point of view as well as a fly on the wall kind of thing I was present there so that's
#
the approach and in additionally I thought there'll be a value addition the governors
#
who actually post economic liberalization we had this governors what do they say I approached
#
everybody not everybody responded positively but those four who responded Rajan Reddy Rangarajan
#
and Subbarao this itself can be a book what is their take on the problem and how have
#
they come and there I have asked them I would say brutal questions like are you responsible
#
for this and they answered whatever it is and then the your charts you spoke about I
#
thought it's a 1.5 lakh 150,000 word books so if you don't have time probably you can
#
only read the charts some 16 odd charts which tells the story so that's that's the structure
#
So you've mentioned a number of layers and I'm going to ask you about each of those layers
#
one by one because they're all so fascinating and I'll ask you to demystify it but first
#
of all you know you mentioned that what Nirmala Sitharaman said about Dr. Rajan and Manmohan
#
Singh and I love the fact that during your interview with him you actually asked him
#
this that what's your response and I'll quickly quote what Dr. Rajan said in response to this
#
where he said quote I do not want to get into the politics of it she has to say what she
#
has to say what I will say is that I repeatedly told the government that if we do not clean
#
it up quickly you cannot blame the problem on the previous government it will be your
#
problem I think now it is a government's problem stop quote and these are very wise words and
#
because you know now we are in 2021 this government has been there since 2014 and it is of course
#
true that many of these problems began before this government came to power like I did an
#
episode with the journalist Pooja Mehra who's written the book The Lost Decade and there's
#
a lot of sort of description there of how so many of these problems including especially
#
the NPA problem happened in the previous regime much of which you have also kind of described
#
through your sort of narrative which is so kind of fascinating and what I loved about
#
these interviews of all four is that you are asking them brutally honest questions and
#
they're giving you brutally honest answers you know like Subbara for example admitting
#
that yeah mistakes were made but you can see that in hindsight in the moment we did what
#
was right and you know all of them being so kind of open about it do you feel that many
#
of these bankers even if they are like appointed by different political parties at different
#
times even if they're carrying out policies opposed to what the previous guy might have
#
done do they kind of see themselves as part of a community of bankers who are all after
#
all working for the you know the good of the nation and the good of the industry so there
#
I would call them the warriors kind of thing it's a basically it's a we have a large government
#
owned industry which is stock will be about 65 percent that's the public sector banking
#
the numbers have gone down but their market share have not I mean it's going down slowly
#
that's a separate story altogether but they are basically a sort of warriors and it's
#
the government that calls the shot so I don't think they have any political affiliations
#
or they have their own ideology et cetera nothing it's whatever they've been asked
#
to do they do this and irrespective of which government is in power now the larger issue
#
is this as Dr. Y.V. Reddy has mentioned in interview also it's not the ownership but
#
how the owner behaves it's a socio-political instrument banking in India the state-owned
#
banking system is a socio-political instrument you know in the 80s there's a Tata Steel
#
ad we also make steel I think the bankers can say we also do banking because beyond
#
banking there are so many other things they need to do you will find that such Bharat
#
Day the branch managers on a broom on the on the pavement near their branches to cleaning
#
up the things so there are so many things it's basically it's a socio-political instrument
#
in the banking system so you need to decide that whether they will continue to do or you
#
treat them like a business units you can't have the best of both worlds that they will
#
do financial inclusion they will go for MSME lending this time it is government guaranteed
#
the three trillion three lakh crore rupees during the COVID time but otherwise they are
#
always under pressure to to go certain segments whether it is MSME SME or infrastructure lending
#
in certain areas they do not have the expertise etc etc so but the government pressure and
#
this is irrespective of which government is in power I'm not talking about the phone banking
#
which this government has been talking about it that basically calling them up at telling
#
them this industrialist you give loan on that industrialist I'm not talking about that I'm
#
talking about irrespective of which government is power it's a greater good of the nation
#
and the society and the downtrodden people the so-called bottom of the pyramid they have
#
been using the banking system and the bankers the CEOs and MDs of those banks I don't think
#
they have any ideology they don't have any political affiliation they are just the warriors
#
of the government whatever they have been asked to they have been doing it now you can't
#
have this and plus also they will be a great entities as a business entities you can't
#
have both the two no so you have to take a call and I'm glad that this budget has spoken
#
about privatization to start with two banks I think they should go for more probably a
#
few large banks can remain as a sort of insurance against market failure and to do the government
#
things like MSME financing financial inclusion so on and so forth but let the others go and
#
run as a business enterprises and and you know that brings me to this larger question
#
that has often struck me that when you bring these two together at one level a bank is
#
a bank and you might say that we don't only do banking but banking is noble finance runs
#
the entire economy it's you know that's noble enough by itself you don't need to do more
#
than that but when you add these social objectives on that do the incentives go in the opposite
#
direction for example you know I haven't read your book on Lehman Brothers but one of the
#
things one of the perverse incentives that played a very small part in the 2008 crisis
#
happening was of course when the US passed the Community Reinvestment Act of the late
#
1970s where they mandated that you know housing loans have to be given to people who would
#
otherwise not qualify as credit worthy and many of those added to you know those perverse
#
incentives and added to what later became you know a bad loans problem so is there a
#
similar thing I mean how does then one balance all this right on one hand you say that okay
#
these public sector banks are not just banking there are all these social objectives that
#
they have to fulfill which might be noble objectives but maybe there are other ways
#
of doing that but your mandate they do that and plus you have all the other incentives
#
they have is that no one's really accountable within the governmental system right you are
#
not like in a private sector bank there is always a pressure of the market if you have
#
too many bad loans the market will punish you in a public sector bank market won't
#
punish you instead the government will recapitalize you with you know yours and my money taxpayers
#
money so what do you feel about this sort of interplay of incentives that happens no
#
absolutely absolutely I mean what happened is this like Mudra loan okay you force the
#
banks to give their loan now it's an abnormal time the COVID time things have gone different
#
but even pre-COVID I am talking about you need to find out how is the Mudra loan living
#
I have heard RBI deputy governor from public forum saying that Mudra loan is there are
#
too much of NPS been growing so once you force the bankers to get into certain areas as I
#
said it's a social objective socio-political objective now then you don't expect them to
#
run like a business enterprises so Mudra loan is a classic example or say Gishan credit
#
card you ask you ask any bankers it's perpetually you know it's always replenishment the loans
#
are never paid back it's always the fresh loan and evergreening it's happening often
#
I can tell you this to Gishan credit card and Mudra loan so what is happening as you
#
rightly said that this social objective you know 51 years back 1969 bank nationalization
#
happened in two stages first stage was 1969 and then you know you ask any bankers they
#
take enormous pride that we have built the nations we have built bridges we have built
#
toll roads we have built everything we have taken banking to the hinterland financial
#
inclusion yes they have all done this but do we live in this nostalgia and continue
#
with that or is it the time that you recognize that this thing cannot go it has to be either
#
or either they continue to be in a situation where they will cater to our socio-economic
#
need but then we let's not expect a dividend from them let's not expect them to run like
#
a commercial organizations or you do this don't do that at all and let them get it get
#
the go of new avatar should be a commercial organizations which cannot be done unless
#
they are privatized because as I said what Dr. Reddy said that it's not the ownership
#
but how the owner behaves he also said they follow a rule of Hindu undivided family it's
#
between RBI the regulator and the banking division of finance ministry and the banks
#
there is a very loose accounting policy system nobody actually cares there is no there is
#
no accountability as such so there are two extremes and the midway should be which probably
#
the government is trying to follow now part of them partly you privatize them let them be more
#
efficient as a business and price and let there be certain entities still majority owned by the
#
government to do this work because if that's the case the other side also you know the banks are
#
not accountable these are all very target oriented no it's not target is not quality but on quantity
#
this much loan you have to given it's not you will not find in the target the quality of assets
#
it's the how expensive the assets would be have you ever heard any banker being losing job because
#
that person is inefficient no on governance issues there have been cases where somebody else
#
somebody at times have been asked to step down but on case of inefficiency no and look at the way
#
they are being paid it doesn't justify at all when you look at their counterparts in the private
#
sector the difference in the kind of pay package between the public sector bank CEOs and the private
#
bank CEOs so in every way you know you actually their hands are tied from behind and then you
#
can't expect them to do wonderful job you can't have the best of both worlds so I think this is
#
the time now to take a call and happy to see that the budget has done it yeah I mean one of the one
#
of the interesting sort of nuggets in your book was that you know the reason public sector bankers
#
get paid so little compared to private sector counterparts is because a bureaucrat don't want
#
them to get paid more than them yes it's capped capped at the bureaucrat salary it's capped at
#
the bureaucrat salary and you mentioned bank nationalization I came across this delightful
#
nugget which I'm going to read out in your book about that which reminded me of another prime
#
minister and referring to how indira gandhi took the decision you've written quote neither IG
#
Patel then the economics affairs secretary nor LK Jha then RBI governor was taken into confidence
#
even Morarji Desai then deputy prime minister holding the charge of the finance ministry
#
was kept in the dark stop quote and I read this and I immediately thought of Narendra Modi and
#
demonetization but I won't put you in the spot and ask you to comment on that and again about
#
targets you know one of the quotes that struck me and which I highlighted about public sector
#
banking was when you've written quote public sector banking is all about targets these targets
#
are first said by the government and reinforced at different levels in the bank's hierarchy
#
the quality of lending and recovery is not as important as achieving the loan targets top
#
quote which you just elaborated upon let's now sort of talk about it you know I just call them
#
complaint boy you know those that you know it's that it's all about how tall you become
#
so they're all they're all complaint boys public sector banking is all about being
#
complaint boys and complaint girls so that you are you're tall your balance sheet is large
#
but not inherently are you strong no no offense on complaint as such I just mostly I'm saying
#
that this is what it's all about the height it's in complaint is all about the height I'm a
#
compliant boy I'm a compliant girl here is all about how big is your balance sheet now I'm
#
getting full of nostalgia because you're bringing up these 80s commercials earlier it was this part
#
we make now complaint girl I'm waiting for you to mention now you've become a Bonvita mom or
#
Maltova mom which one was it whatever so let's now get to sort of I found your first chapter of
#
your book absolutely incredible it's called like for the listeners the title is who killed Indian
#
banking and one by one you are examining all these different layers like you said and I'd like you
#
to sort of go through those different layers with me as well and one interesting point you make
#
early on is that about DFIs development financial institutions and how you know shutting them down
#
in the 90s was something that kind of changed the environment tell me a little bit about these
#
DFIs and the role they played and why that transition could have played a part in the
#
crisis today no it's basically you know we had this IFCI IDBI and ICICI and there are a few others
#
is basically in the project financing so you have banks which were into working capital loans and
#
you have DFIs which are into project financing and the DFIs were actually they used to get
#
sort of subsidy from government in the form of long term money at a concessional rate but post
#
liberalization it was decided that they would not get this anymore and if they would not get it then
#
where do the money come from that's the problem and then they got into the problem of asset
#
liability mismatches which ICICI and IDBI was forced to convert themselves into bank now they
#
got merged with the with the bank themselves so essentially we embraced we pulled down the
#
dividing wall between DFIs and banks and we made the banks the so-called universal bank which will
#
take care of everything but unfortunately our bankers have been trained for working capital loans
#
they have not been trained for project loans because project loans a of course you need long
#
term money and then the risk management etc is is pretty different and of course along with the
#
DFIs had there been say bond market then I mean the really vibrant bond market that would have
#
been a different story but this has not happened so ICICI had to get merged itself with ICICI bank
#
it happened if I I discussed about how Mr KB Kamath made the presentations to Rizab Bank of India
#
and explained that how the what kind of how many slides were the presentation I spoke about that
#
and essentially the asset liability mismatches and they could not survive it had to be done and
#
similarly it happened with IDBI later and now it's very interesting that if you ask me now as we
#
speak this budget is talking about DFI that the government the budget is talking about the DFI will
#
come up and it will give some five trillion five lakh crore worth of loan in the next three years
#
or so that's the plan but the key question is where will the money come from government can give the
#
capital but the money come from in 90s we had to close down the DFI's because the short the tap
#
for the government long term low cost money was closed now are we going to open that tap again
#
you know reversing the decision of 90s after 20 years odd but where would the money come from
#
because of fiscal deficit so there are many questions need to be answered or what will be
#
the model of this DFI we do not know but the fact remains is this the DFI had to go the banks have
#
not learned the way to lend project financing both in terms of risk appraisal and monitoring
#
and that's what one of the reasons we are in ms so if i might ask what might be a stupid question
#
it's been 30 years why haven't they learned that's that i think bankers they you know the book also
#
dealt with one of the key reasons which are related like the state bank of india had a
#
merchant banking win called sbi caps now sbi caps have been primarily working as a appraisal of the
#
all the project financing now there's a clear conflict of interest and i mentioned about that
#
and reserve bank of india sometime back had said that that the investment banking arm of the
#
country's largest lender appraised the projects and then it recommends and then it also hawks the
#
projects to other banks now the sbi is big balance sheet and the ability to take risk is very different
#
from much smaller banks where their balance sheets are much smaller and their ability to take risk
#
but because sbi is doing this and sbi caps has appraised and sbi caps hawking it the others will
#
come on board because nobody wants to as i said it's a target compliant boy syndrome if somebody
#
is giving money i also need to be there and i'm sure there will be pressure from the ministry and
#
all you need to get into infrastructure you need to give money because you have periodical meeting
#
with the ministry and there you have been asked that what is your how much loan you have given to
#
infrastructure sector so on and so forth so i think it's a combination of multiple things
#
so they are so there is no individual project appraisal in accordance with your balance sheet
#
and risk appetite it is because the country's largest bank is going there because it is appraised
#
by the investment banking arm of that largest bank it's good and everybody else irrespective
#
of your risk appetite your balancing strength what you can do you go there it's a sort of hard
#
mentality and then you pay a price because somebody will be able to take the knock because of the
#
balancing strength but many of the if when the loan goes bad but many of you will not be able
#
to take the hit i'll come to sbi caps later because that's also incredibly fascinating one of the
#
things you also mentioned is that one banks did not sort of develop the skill for this kind of
#
project financing and some of that might have to do with incentives like you pointed out and the
#
way they all played out but you also pointed out that a deep corporate bond market might have made
#
a difference but there was no such market tell me a bit about how uh you know the shallowness of
#
this market and i'm struck by one sentence in particular where about these bonds at one
#
point you write quote holidays also lead to inconvenience if the redemption falls on a holiday
#
the issuer is required to pay up on the last working day before the holiday but different
#
states have different sets of holidays yes yeah you know these are all little technical things
#
but yes these are all because you know you have a market holiday at different different states are
#
different like a maharashtra devas will be a probably a holiday here netaji shivas bose will
#
be a holiday in west bengal so if you are a subscribed to that particular bond and if you're
#
in days that then you are inconvenient so there are there are multiple issues we have been talking
#
about for decades now on creation of a corporate bond market but it's not happened for multiple
#
issues you know tax is one angle then this is some silly holiday is another angle and there
#
are many more things and all but the key issue is this one of the reasons why our bankers could
#
get away by hiding is because we don't have a corporate bond market now in a developed market
#
you know like us or others if you have a vibrant corporate bond market and if you are a defaulter
#
then no way you can hide yourself no today is the redemption you have not been able to do this
#
so you are exposed but in a bank loan if you are a banker and i am a borrower we can work out some
#
kind of deal between you and me which will be basically the so-called evergreening etc etc
#
your balance sheet management because you have a vested interest the moment you say tamal is a
#
defaulter then you have to provide for it your provision will eat your capital and you also
#
tell the world your investors will not be happy because amit np has gone up so it serves you also
#
to help me out it the kind of nexus works out between you and me which cannot happen in a
#
corporate bond market corporate bond market amit you have subscribed to my bond and i have not been
#
able to pay you the money back on that redemption day you have no choice but to announce that tamal
#
has become a defaulter so which is why it was much more difficult in india to wage a war against npa
#
because the banking infrastructure gives you a mock screen to hide yourself that's a fantastic
#
point and just to demystify for my listeners what these sort of bonds are and why the lack
#
of a secondary market is a problem i'll quickly quote from the book itself where tamal writes
#
quote bonds are secured instruments which allow funds to be raised for the long term or even
#
forever in the case of perpetual bonds if a bond holder wishes to exit she can sell the instrument
#
in the secondary market hence a bank which uses short-term financing or a mutual fund facing
#
redemption demands can also pick up long-term duration bonds without fear of asset liability
#
mismatch this of course depends on a liquid secondary bond market where instruments are
#
easily traded this is a case in most developed markets including the us stop code and like you
#
correctly said that when you don't have that kind of a market flourishing you also therefore have
#
less information and the market can't really punish you because there's nothing that it's
#
looking at there's nothing you know so i kind of get that another sort of factor and i'll come back
#
to the banks and the evergreening and all those incentives later i'm just going by the order of
#
layers that you examined in your chapter another layer that you mentioned is sort of the flood of
#
what you call the flood of money where you talk about how our response to the 2008 crisis
#
mr subharao's response was uh to just lower interest rates and flood of easy money flooding in
#
and some people have made the point that initially it might have been a wise thing to do but he
#
should have stopped but just for a couple of years it kept continuing so tell me about how this
#
could have been a contributing factor in the bad loans crisis that then took place later
#
well say i'm what i'm saying is one of the assumptions no i i don't have the last word on
#
that it's one of the multiple factor one factor is this uh when lemmon happened uh you know this
#
subharao uh parachuted into as a central bank governor just about a week before the lemmon crisis
#
ready step down i think eight september or nine september i don't remember exactly just about
#
roughly a week before and 14 september india time night lemmon collapse happened subharao was the
#
first finance secretary in office transported to rbi there have been in the cases from finance
#
ministry but they have gone through some other assignment then coming here but here is and then
#
lemmon collapse and one way of preventing this kind of scenario like in covid time also we have seen
#
that when uh market become extremely risk-averse interest rate hits the roof you flood the system
#
with money you encourage people to borrow one is this you break the risk-averseness of financial
#
intermediaries you flood the system with money and you encourage consumers to borrow so that
#
borrow and spend so that quickly the uh you can get back to the normal normal the economic growth
#
etc it did happen which is why even we don't say many of us say that it was not a global financial
#
crisis it was only a transatlantic crisis because its impact was limited india did not have that
#
dr rakesh moun is one of the persons deputy governor he firmly believes that it was nothing
#
to do with globe it's only transatlantic crisis u.s peddled it as a global economic crisis but
#
look at india we're not affected only two quarters i think our economic growth came down below five
#
percent we came back so subharao brought down the rate to historic low crr also came down very low
#
he flooded the system with money but then when the normalcy was returning he was slow in unwinding
#
and there is a classic conflict always happens between the government and the reserve bank of
#
india because any government irrespective of its color is there for five years it can go beyond
#
that but typically it's a five-year horizon and government feels that the growth can only happen
#
if you have a loose monetary policy which is money in the system a lot of money in the system and low
#
interest rates so people will borrow and people will spend but reserve bank of india feels that
#
because it has a long-term views and institution it does not feel in five years horizon it does
#
not see it feels that no if you have a sustainably low inflation that can only ensure a long-term
#
growth so there is always a conflict and it depends on how a governor handles it now so
#
subharao was under pressure from then administration not to rewind and he started what people say
#
taking baby steps while cutting the rate by one percentage point one and a half percentage point
#
two percentage point while hiking rate at 25 basis points so that showed the seeds of inflation
#
and that also by the time all those people who wanted to have money they have got their money
#
too much of money they have got etc which also happened during dr reggie regime also
#
and by the time subharao realized and he started you know asserting himself and then there is a
#
clear conflict between ministry and him and if you remember his last policy 2013 before going
#
there was tremendous pressure from the finance ministry mr chidambaram was the finance minister
#
that time to cut the rates but he stuck to his guns he did not cut the rate and then finance
#
minister chidambaram on record television channel said on the growth path i have to walk alone rbi
#
is not giving me shoulder and subharao responded to this in his book in his inimitable way incidentally
#
now soon in current context we'll have the same scenario mr satikanta das the current governor
#
he has flooded the system with money with the crr cut and many other things and he had brought the
#
interest rate to historic low last year lower than what subharao did and now as the growth picks up
#
he will have to figure out how to unwind he has already started like the crr reinstating in two
#
stages but market was not happy and in addition to what subharao's problem here he has mr current
#
governor has a bigger problem because the covid is a much bigger issue and the fiscal deficit is much
#
higher now government borrowing is much much higher so he has also the the challenge of him he has
#
done a remarkable job to tackle covid and keep the financial success stability and bringing the
#
economy to a growth path but now as the time of unwinding comes which is already knocking at the
#
door because we are talking about 10.5 percent growth next year he has to unwind it cannot be
#
always this kind of liquidity sugar rush and low rates so that the what subharao faced during his
#
regime i'm afraid the current governor also will face now and that will be the litmus test of him
#
how to unwind that's really fascinating the political aspect of it i'll take this moment
#
to point my listeners to an earlier episode i did with puja mera who wrote this great book called
#
the great lost decade as well where her narrative if i'm remembering it correctly was essentially
#
that you know chidambaram and subharao together chidambaram was finance minister at the time
#
you know lowered the rates as they had to at that point in time they felt it was wise but then the
#
terrorist attacks in bombay happened and chidambaram was shifted to the home ministry
#
because the then home minister i think it was shivraj patil wasn't doing a great job
#
and pranab mukherjee got put in the finance ministry and pranab was putting a sort of immense
#
pressure to keep the interest rates low and to keep the easy money going which would of course
#
be in the interest of politicians to do always because you know you can give an appearance of
#
growth that way now now would i be correct in just to again demystify why this is a problem
#
what low interest rates effectively do is they just they increase the money supply there's more money
#
in the system some of it of course can reflect in everyday inflation for people but what also
#
happens is that banks financial institutions and all of that have more money to lend more money to
#
play around with and therefore they start giving more loans and this can also play in with the
#
politics like earlier you referred to phone banking and and allegations were even at that time that
#
the finance ministry under mukherjee was you know running a phone alone scheme which is like almost
#
self-explanatory so i was also struck by again i'd like to point my listeners to the interviews at
#
the end of your book because dr rangarajan there says that india overreacted with those
#
low interest rates and that he warned against it from the rajya sabha where he was at the time
#
and similarly dr subharao indicates that yeah in hindsight you can say it was a mistake and it was
#
but at the time what do you do these are the circumstances is that sort of an accurate
#
summation of everything that that's going on no one is this as i said subharao himself and
#
at hindsight we said that the ultra loose monetary policy was probably not exactly warranted or had
#
it been warranted it could have unwinding could have been faster baby steps did some damage and
#
right now what you are saying if there is too much of money we run the risk of being in of inflation
#
and misallocation of credit on the first part i do agree yes it will be inflationary too much
#
of money that is a plain economics we don't need to get into the theory but on the other side i
#
have no i i don't think so because i think bankers have learned a lot you know after this
#
um the entire in rbi's fight against npa and the the massive cleanup what happened and all
#
so bankers have gone to the other extreme they're becoming very risk averse and if you ask anybody
#
in the past one year or so even during the cobit time reserve of india and finance ministry is
#
actually making this allegation that bankers are risk averse and if you ask the bankers they will
#
say in private they will say look when we were giving loans and you found that we are pretty
#
liberal in giving loans and we have burnt our fingers we have found that things were not
#
exactly did happen the way we wanted we we accumulated bad assets you blamed us and then
#
not only blamed some of them were sent to jail and then the all the investigative agencies were
#
very active and it's pretty unfair in many cases and now when we are using our discretion
#
i want to check who is worthy to be given loan and who is not you are telling me i am risk averse
#
so what is so i don't exactly agree with what you are apprehensions probably no because
#
the backdrop is very different than what happened in 2000 post lemann crisis there is no rbi in
#
war against npa there was no activism by the investigative agencies bankers are not thrown
#
into the jail so on and so forth but between 2016 and 2018 19 this three four years bankers had a
#
torrid time i think they have learned a lesson they will sit on the cash they will give keep the
#
money with reserve bank of india's reverse repo window and earn in technically what you call
#
negative carry less than what they are paying to depositors but they will not be easily carried
#
away by the flow and start giving money left right and center which they've done in the past they
#
have learned their lessons in fact you refer to this in your book is fair psychosis and i'll
#
lovely phrase and i'll come to that as well no what i meant was not with reference to the present
#
time but in general the one thesis is this is what happened then that because there was so
#
much money in the system yes there was just a lot of lending that went on let's also talk about like
#
one thing that i won't ask you to elaborate upon too much i'll ask my listeners instead to just
#
read your book on that is you've spoken about how uh what you what you describe as infrastructure
#
blues set in where there were land acquisition issues there were power project issues telecom
#
issues things were either stuck because of policy paralysis which you've also written about that
#
you know bureaucrats would be hesitant to sign on anything because you know allegations of
#
corruption were huge so no one wants to take a risk they just want to really play it safe and
#
in all of these sectors there were massive problems and what happened because of all of these
#
problems therefore was that you know all these infrastructure companies have taken these loans
#
but now the project isn't happening so what do they do and yet you know they kept finding a way
#
out due to you know various sort of tricks like evergreening and you know restructuring and other
#
euphemisms which came in tell me a bit about how all of that kind of started to then take place
#
no it's essentially you know this is as i said there are and i'm very impressed the way you
#
have read the book you know it's every every beat i think you have read so this is one of
#
the contributing factors and as i said bankers also have a interest no because if if i am a banker
#
if i the moment i identify a one known as bad loan then i need to provide for it it it's into
#
my capital i'm not very sure whether the government will give the capital to me so it also helps me by
#
camouflaging by evergreening that's what they have done and apart from many many thing else
#
the contributing factor is the policy paralysis that you have said which you have seen the second
#
up during the second part of upa between 2009 and 14 things were just not moving there are
#
problem with the environment ministry they are problem with the legal issues and projects were
#
not picking up so if your borrowers have taken money and then he is not getting the right kind
#
of clearances then the project will not take off so what do you do on that so that's the kind of
#
thing so then you have i don't want to get into all the technicalities and burden your audience
#
as you rightly said one need to read it but how even this project commencement date plays a here
#
in this case plays a very critical role and how they are restructuring the loans and changing the
#
project commencement date just to keep the loan alive so if you if you look at the entire bank's
#
books they are all restructured loan and the nps were hiding within stack of restructured loan
#
it's only after reserve bank of india start fighting it out and forcing the banks to come clean
#
then you look at the two charts the restructured loan chart and the npa chart will be very close to
#
the restructural loan chart and the structural loan is npa plus other restructured so till about
#
2015-16 before the rbi started its war the restructured loan chart will be very long
#
and the npa chart which will be next to it will be very short because they were not accepting it
#
is my npa it's only the structure but when rbi forced them the npa charts going up and the the
#
gap between the restructured loan chart and the npa chart started you know closing up fascinating
#
and i want to kind of break this up this problem of bad loans from the bank's point of view into
#
two parts one is how are they giving those bad loans and two is once they realize that these loans
#
are shady what are they doing to kind of what kind of different kinds of jugar are they doing
#
to kind of keep them going and not declare them as npa now when it comes to the first part when
#
it's sort of the giving of loans at one point you write quote seduced by the lure of credit growth
#
they fail to do due diligence and accept project appraisals done externally at face value and then
#
when they ran into trouble they also tried to cover it up etc etc and you also point out that
#
these appraisals are you know a sham because like you say quote appraisals carried out by
#
professional merchant bankers with conflict of interest as they were hired by borrowers
#
unquote so that and this sounds to me exactly like the credit rating agencies in the u.s before the
#
financial crisis there that they are paid by uh sort of the borrower so obviously they'll give
#
good ratings the incentives are just completely messed up and you've referred earlier in this
#
episode to sbi caps also tell me a little bit about sbi caps and how they uh you know the perverse
#
role that they played in this no it's actually it was pulled up by reserve bank of india uh
#
recently some time back uh sbi cap as i said it's a investment banking arm but there's a conflict
#
of interest is hired by the borrowers and then of course it in turns hires different agencies
#
in that respective field whatever the best one but ultimately the buck stops there it's the
#
owner sees on the sbi caps and then it does not stop here it then hocks the so first it's a role
#
of the project appraisal which it of course it outsourced from various entities and then it
#
becomes the project syndicator so then what happens is that it sells the loan to others as well and
#
then how does it sell because sbi is the lead lender others get carried away and everybody
#
wants to be there public sector banking is all about target as i said target is not about
#
how impeccable is your asset quality what is your return on assets what is your return on equity
#
these are not the targets targets are what's your loan book what's your deposit book how much money
#
you are given to the sme sector how much money you are given to the priority sector how much money
#
you are given to the infrastructure so on and so forth so when you are when you are under the
#
pressure to meet the targets so you become yourself an easy target easy prey for this
#
and that's how it happened so there was nothing called project appraisal because it's appraisal is
#
you know done by an agency only the top sheet gets changed so you put your stamp and put your
#
bank's logo etc etc it becomes your appraisal and that's how it happens that's what exactly
#
has happened and when it goes as i said then it can go bad for multiple reasons every promoter
#
is not exactly ethical what dr rajan found out that many of the indian promoters actually don't
#
bring in their own equity so any project has two parts equity and debt and depending on the profile
#
of the project the debt equity ratio depends but there have been many cases the promoters don't get
#
their equity they use the debt as equity and also debt so there would be definitely compromised
#
promoters who don't want to just taking your money and don't want to pay back and there will be
#
external circumstances like the what happened during this upa to the entire policy paralysis
#
so it was a very complex scenario multiple contributing factors and then the banks were
#
instead of telling the world look we made a mess of it and it's in a bad shape because as i said
#
because of the fiscal deficit the government cannot be liberal in recapitalizing and once
#
you bear everything then your investors also will not be happy so you keep on evergreening
#
find ways how not to tell the world how bad is the situation till raghu ram rajan took the ultimate
#
step to expose it yeah we'll come to that and just to sort of this is this passage on evergreening
#
which i think is a very sort of a lovely portrayal of how it happens so i'll just read it out for the
#
benefit of my listeners where you write quote when a project got delayed the banks approached
#
an investment banker like sbi caps to create some room for fresh loans this could be done
#
through various creative means in some cases a sub project was created or the original project
#
was expanded or a product line was added the company setting up the project could for example
#
by so-called line balancing equipment to make it more viable and efficient let us say the new
#
facility may need 300 crore the cost can be padded up with fills like building improvement retrofitting
#
of equipment repairs and other miscellaneous expenses which are difficult to quantify making
#
it say 500 crore such practices were rampant in the power and steel sectors lenders sanctioned
#
additional loans based on the investment banker's appraisal with nominal or zero equity infusion
#
from the promoter the lending banks claimed the new loans helped the company service the interest
#
and installments and so prevented the entire exposure from becoming an npa stop quote and it
#
strikes me here that you know earlier we were talking about incentives and even in past episodes
#
that i have sort of done on banking and npas and all a long time back we've spoken about how the
#
incentives for psbs and private banks are different in the sense there is much more
#
accountability in private banks you know they'll put a lot more effort into appraisals and all
#
but when it comes to something like evergreen it seems that the incentives are similar if i
#
may think aloud because nobody wants to show bad loans on their books and this is just a good way
#
of you know making the books not look as bad as it were so but you know when this aspect comes
#
evergreening and what you you later have a section on the creative restructuring would you say that
#
you know the incentives are perverse all the way through yeah actually you have raised a very
#
interesting point if you look at the npa overall npa you will find that public sector banks have
#
far higher npa than private banks but if you look at with a look a little closely you will find that
#
no it's not exactly correct yeah as a group they are but there are some banks which are
#
almost negligible npa because they don't get in there like for instance hgfc bank and cotok bank
#
they will not take exposure to that kind of areas so they won't have any npa whatsoever for that
#
particular segment but if you look at icici and axis those days i'm talking about 2014 15
#
you will find their npa in that segment is comparable with public sector banks so it's
#
not only the public sector banks have gone wrong those private sector banks which were betting big
#
on the india story infrastructure they read the economic headwinds wrong they also got into trouble
#
and which is why this particular two banks in those days i'm talking about not now icici and
#
axis bank also have pretty pretty high exposure to these segments which the public sector banks
#
have so it's always i mean you have gone wrong for multiple reasons you have gone wrong and then you
#
try to find out how to do this and what you read out some extract from the for the listeners it's
#
that the it's a classic evergreening that i can't give you a loan for the same project so we figure
#
out how to create a sub project and give a loan so you are able to pay me back service the interest
#
for the time yeah no and and if i'm think aloud i think the difference between private sector and
#
public sector banks when it comes to giving the loan in the first place you know doing the due
#
diligence and all that is that i think the private sector bank is equally likely to make an honest
#
mistake where they get carried away by whatever the environment of the day may be the animal spirits
#
or the irrational exuberance but if you're looking at careless mistakes or even malicious mistakes in
#
the case of forna loan scheme those are more likely to come from the public sector banks but
#
when it comes to evergreening for example the incentives seem to me to be pretty much similar
#
so would you agree with that yes i would like to believe that yes i mean we can't yeah yeah i would
#
but only i will just have little qualified that i think you are a little unfair to the public sector
#
probably that it's basically they are always under pressure to fulfill certain targets you know they
#
are the as i said it's a socio-political instrument it's all about target so yes there could be some
#
guys who are compromised but by a large i find that it's not exactly the recklessness or carelessness
#
it's just under pressure you need to do things and you have a very short tenure you know you
#
have very short tenure unlike say where you have 10 years 15 years 20 years and kind of thing here
#
you just manage somehow your two years or three years you need to be not to be hauled up by either
#
the investigative agency or by the government for not doing things etc so that's how you end up doing
#
of course now what is happening is most of the bankers they have understood that not doing things
#
is better than doing things which is why the so-called risk averseness or they are not giving
#
credit they have found that i will not be hauled up for doing any miscreant or sent to arthur road
#
jail if i don't do anything so doing nothing is better than doing something so they have gone to
#
the other extreme yeah and i i must point out that i sounded judgmental about public sector banks
#
earlier but i was not being judgmental about people specifically because everyone's responding
#
to incentives i was more being judgmental about structure and incentives and the way those work
#
where you're more yes now you've got you know these delightful descriptions of creative restructuring
#
using things like epbg export performance bank guarantee and slbc standby letters of credit and
#
you know securitization of future profit and all of it is great fun to read but i'm not going to
#
make you go through those here because you know let the listener sort of discover those stories
#
but you know in a section called confidence tricks you have this fabulous story that i can't help
#
reading out because i just loved it where you're right quote in one such case it was only after
#
cbi officers entered the sbi caps office in cuff parade that sbi caps realized that it had been
#
duped two senior employees of a public sector consulting firm had been involved in preparing
#
a detailed project report for a sick large private sector steel company but the pair had actually
#
left the consulting firm long ago while doing the project appraisal they were actually on the six
#
steel companies payroll stop code and i found this hilarious because all they did was they used their
#
old visiting cards when they visited and that was enough yes yes so so then these are all i'm talking
#
about the eye for detail or the granular story to make it interesting you know that's what i care for
#
while looking at the theory and doing things also but these are all little things which actually
#
get you feel that you know make it more interesting and that's the entire objective
#
i loved another phrase you used in that same chapter where you talk about hope banking and
#
you write quote the banks were living in hope in many troubled projects i was evergreening with the
#
banks dispersing fresh loans to book artificial profits by recovering interest in previous loans
#
top coat which we've discussed and a great example of that which you point out is 400 megawatts shri
#
maheshwar hydel power corporation which basically was conceived in 1992 it was a project on the
#
narmada but it ran against the narmada dam project and it never took off but despite the fact that
#
it didn't take off it kept getting evergreened and evergreened and evergreened and finally in
#
april 2020 the whole saga got over which is quite such a remarkable kind of story where a project
#
doesn't exist but the loans are just getting yeah that's that's hope yeah that's that's hope
#
banking now your chapter about the war against npas is kind of fascinating where you know raghuram
#
rajan takes over at one point and obviously you know something has to be done so tell me a little
#
bit about how the thinking within the banking community and the regulatory community evolves
#
about these loans and what should we do about them now as you know when raghuram rajan came in
#
2013 his uh object first he got into uh it was sort of baptism by fire because you have npa in
#
double digits and you have current account deficit historic high higher than what it was in 1991
#
which forced india to open up the economy so on the first two front he stabilized you know
#
inflation genie was bottled and current account deficit was taken care of he organized i would
#
say arranged for flood of foreign money to get into india etc and then he shifted his attention
#
to the npa and he figured out that bankers are not telling the truth for multiple reasons as i said
#
because they are afraid that if you expose yourself then you need to have a lot of capital
#
to take care of your bad assets which capital was not forthcoming and of course how the investors
#
approach you and then he figured out that the corporate india is actually taking that so-called
#
crony capitalism corporate india many of many of the companies actually taking the banking system
#
for a ride they are not bringing their own equity it's actually bank debt that's there playing
#
around so you need to do this how do you do this first rbi instituted called acrylic database
#
where the banks were said that all large account 50 crore plus you have to give a data to us and
#
that made rbi sort of aware of the fact that things are not exactly correct the way it should
#
have gone because one particular entity is bad and one bank's book and good at another bank book
#
how can that be it's not possible so rbi got a sense that things are not correct and then rbi
#
launched the first of its kind globally i would say asset quality review aqr and what is this
#
basically i am reserve bank of india you are a bank i don't trust you i don't trust your auditor
#
i will send my team to audit and figure out how it is going and so the teams were created and it
#
is real like a scotland air operation i gave a graphic description it was not operated from
#
the central bank i mean central office of reserve bank of india from the side bhagat singh mark fort
#
it was actually away from the public glare from the fort office so there are teams were formed
#
depending on the profile of the banks the team was formed how senior people will be there how
#
many will be there they went there and they started finding out how things were right or
#
how things were wrong and it was a real time sort of coverage to see what's what's going and just
#
to give an example one inspector rbi inspector finds that one particular loan in a bank's book
#
it's still not paid on the say 88 or 89 days and on 90 days it will turn bad so the
#
particular rbi inspector checks with the ceo says that look this is going to be bad what are you
#
going to what are you going to do it's only 48 hours or 24 hours left and the bank ceo
#
told the person that look don't worry we have seen this entity typically it pays on the last day
#
and look on the last day the money actually came and the inspector was very happy that here is
#
a banker who actually tells the truth and knows what exactly happened and the account did not turn
#
bad but then just out of curiosity he started digging it and found out the money came on the
#
90th day this bank but it left and it gone to another bank and for that bank the 90th day was
#
actually two days later so what was happening a group of banks come together and sanction a loan
#
but the disbursement happens on different days so a's 90th day is different from b's 90th day
#
it's different from c's 90th day and same money you would call it round tripping you know comes
#
to the bank and makes it good on 90th day leaves and makes a good 90th day of the second bank
#
and leaves and goes to the third bank so that's how the entire thing was was you know was exposed
#
and then there was a series of meeting between the bankers and RBI bankers put up a strong lobby and
#
there were various other lobby groups to impress on reserve bank of India that this is unfair it
#
cannot be done the banking sector would collapse but RBI was not convinced the question was how
#
much time would be given to the to the bankers to come up clean and I think after a series of
#
meetings when they were convinced that yes things were not correct I mentioned graphically a team
#
led by governor and the deputy governors they met and they left for Delhi met the finance minister
#
and convinced the finance minister that this job has to be done and then the very next day the
#
finance minister issued a release how it's done and of course they convinced the finance minister
#
also to come up with a massive two trillion plus recapitalization fund so all these things had
#
at this almost simultaneously and it was decided that banks were given six quarters which is
#
between December 2015 and March 2017 they would they would come up clean and if you look at the
#
data those days you will find that till September 2015 the banks NPA were like two percent three
#
percent four percent etc but during those six quarters they hit the roof and ultimately we
#
found like say IOB Indian overseas bank and IDBI bank and UCO bank at least these three banks I
#
remember the NPA shot off to close to 30 percent probably 10 times bigger than all so what I did
#
is this first six quarters you you start cleaning up and then RBI also forced them to come up to
#
tell the world to tell SEBI etc if a bank's understanding of NPA and appreciation of NPA
#
that is the calculation of NPA was different from reserve bank of India's calculation of NPA so you
#
would find that like yes bank is a case or access bank or even ICICI and many other banks in public
#
sector too they had to regularly come up and tell the SEBI and others look we calculated much less
#
we under provided had we done the right kind of provision then our net profit would have come down
#
or in some cases they would have actually ended up making their losses and the NPA would have
#
gone much higher so that's the war against NPA and simultaneously of course in a record time
#
the government of India put in place IBC Pranam Mukherjee has I think president signed it off on
#
in August 10th August 2016 if I'm not mistaken and by December it was up and running so you have IBC
#
which is a bankruptcy code with the bankruptcy yes is the bankruptcy code and you have the entire
#
actually you strip the banks naked you know that's what that's what happened yeah so you know you'd
#
mentioned in the break that you were a poet and you wrote Bengali poems and you'd also mentioned
#
that maybe you would like to write a novel someday or a film script and since you mentioned film
#
script you know there are parts in your book which are so beautifully described that they should
#
really be in a web series so if someone in like the OTT business is listening kindly get in touch
#
with Tamalda and hire him for the job I want to read out one particular scene that you've described
#
about the asset quality review team the AQR team how they are at the what they're doing at
#
the cuff parade office where you write the AQR team was like a financial bum disposal squad
#
trying to disuse explosives which could destroy the depositor's trust the bedrock of banking
#
a control room was set up on the third floor of RBI's cuff parade office away from his central
#
office and mint road two general managers were collating the real-time data a third general manager
#
was consolidating them under different heads and a fourth one was looking at the big picture on the
#
computer screen the chief general manager in charge of DBS was heading the control room for six months
#
the team hardly slept all of them worked flat out even over the weekends every evening the cuff parade
#
team would come over to the central office to take stock of the situation over poha and coffee from
#
the canteen the meetings would carry on till at least 10 pm but quite often there would be calls
#
at midnight or later from senior colleagues who stayed tuned in 24 7 slowly the big picture emerged
#
stop code which is incredible and the date but you know the little details uh like poha and coffee
#
from the canteen and all of that are what give it um so much life and you also describe the weird
#
things that they find here like they find that a huge sum of money has been deployed for oil and
#
gas exploration but then they just do a google search and they find that the oil fields that
#
are supposedly being funded has already been identified as dry so there is nothing there
#
clearly a scam then you talk about another scam where they use the sblc standby letters of credit
#
and you know a guarantee on one bank causes another bank to lend and the rbi finds these are
#
being used as chain letters where you write quote bank a was giving money based on a guarantee by
#
bank b and then it was passed on to bank c d e n f and so on stop code and the amount of creativity
#
that uh the the banks and uh whoever they've given the loans to is like like incredible and and you
#
of course in the book you've described much more of it i've just uh taken these uh selected excerpts
#
but do you ever find yourself admiring the creativity and ingenuity of these guys who are
#
just you know and at the end of the day this is the system they are in and they're making the most
#
of it yeah uh but cracking the code also you have to find that it was equally difficult
#
so i think yeah many find fault with reserve bank of india not exactly a great regulator when it comes
#
to uh inspection and supervision and not getting into any controversy or debate but it was not easy
#
i must say because it was not a in isolation is the entire system was working on it it was
#
uh you know on the one hand you have the crony capitalism the crony capitalists they are taking
#
the advantage of this on the other hand uh the large part of the banking system was trying to
#
rig it uh to protect their balance sheets so it was pretty pretty uh that's it difficult yeah and
#
and yet there are these teams of people doing uh heroic things now another interesting layer that
#
you've kind of explored is the action that then you know uh raghuram rajan and his successors took
#
where you have explored the possibility that they might have gone from first gear to fifth gear
#
in in the words that you use and you know there was they were contrary point of views from within
#
the rbi itself that let's give them more time let's not try to do it in these many quarters it
#
won't happen so suddenly tell me a little about that and what were the sort of arguments you know
#
what i wanted to say and i found out from my research and interaction this book is actually
#
based on hundreds and hundreds of interviews i have got four governors on record but i have
#
probably made 40 central bankers if not more off record and others so there are within reserve
#
bank of india there is no unanimity on what would should be yes bankers were ever grinning
#
they are not coming out clean yes there was too much of bad loan but then how do we what is the
#
way forward uh remember ibc came later before ibc this happened now had there been ibc before and
#
then uh you move and you attack the banking system and force them to come clean that's a separate
#
story it started in 2015 ibc came in one year later so then the discussions were i think mr
#
mundra was deputy governor in charge of bank this particular segment there and all he was also not
#
exactly fond of of the idea of six quarters i think within rbi there were different versions
#
that we need to give them more time and in that context only i said that it's from first gear to
#
fifth gear that sir all along you are keeping your eyes closed you allowed them to restructure
#
to evergreen their balance sheets and you look the other way and they had a good time and now
#
suddenly you you tell them that within six quarters they have to come come up clean
#
is this the right approach or should you have given them eight quarters or probably even more
#
because ibc was not there ibc came later so these are the internal debate rbi had within itself
#
at the top echelon but finally dr raghu ram rajan's i think decision prevailed enough is enough
#
uh six quarter is enough that's what it happened it's easier said but those days uh uh what i
#
understand uh because what i wrote is what i could write uh but there are many things i could not
#
write but i am aware of things happen so it's not that easy actually there are heated debate
#
lobbying counter lobbying how to go about it and there was interaction between ministry reserve
#
bank within reserve bank of india also there are differences of opinion etc etc so it was
#
it was pretty pretty exciting time i would say in a positive sense yeah no no incredibly
#
fascinating you know i've taken a lot of your time so i'll sort of briefly first for the listeners
#
what the book contains this is uh you know we've discussed a very very small part of the book
#
there's also chapters on the uh nbfc crisis with uh il nfs and so on but tamal's written about
#
rating agencies there's a big section on public sector banks all that is wrong with them how can
#
we fix them there's a fantastically entertaining section which reads like a thriller on fraud
#
within the banking system uh including colorful characters like goku natchetti a deputy manager
#
at pnb who is responsible for a two billion dollar fraud you know which is part of the whole nirav
#
modi scam you've uh you know written in detail about king fisher what happened there you've
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written about uh chanda kocher and so on and i'll just direct uh all the listeners to go go ahead
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and read the book because it's a wonderfully clear explanation of uh this enormous crisis which is
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upon us and obviously from the show notes i'll also link my previous episodes on this subject
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um you know you've given me a lot of your time so i won't keep you much longer broader questions
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that uh you know we've seen a couple of uh broad sort of storylines as it were emerge out of this
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one is that there is a system which is structurally warped the incentives are crazy and people are
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exploiting that and all these incredibly intricate scams are happening on the other hand you also
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have groups of dedicated civil servants and outside economists and all that who are working
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to fix a problem whether it's ideating or whether it is the almost um the cbi kind of operation that
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the uh you know the aqr team did all of that is happening when you look at the present moment in
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time you know do you feel more hopeful or disheartened and also going forward you know what
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do you think about the banking sector do you think is reforming do you think is reforming but too
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slowly do you think that reform is uh you know not happening at all and it's a problem what's that
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broad takeaway of yours from this well it's actually uh very leading question i mean uh let
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me quickly tell you had we uh been talking one year before in february 2020 you and me this
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discussion my take would have been slightly different not slightly very different than what
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it is now now as we are approaching the financial year end last year that is january february
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uh many of us a person like me who tracks the system was thinking that uh there is some light
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at the end of the tunnel because yes there was fight there was a big purge clean up uh bad loans
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but the first phase which is the recognition of bad loans is almost over and we are getting into
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the recovery phase what i mean is this uh under pressure from reserve bank of india and their
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own understanding and their own compulsion they were coming up clean i mean as i said that
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rbi stripped them naked so we thought that that phase is over now they will start recovering
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their money because ibc again insolvency code in record time india set it up but there are many
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complexities it's not been a smooth sailing because corporate india again the crony capitalism they
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go to the judiciary they go to high court they go to supreme court they find ways what is to game
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the system i mean you can't change them right so ibc has not been working the as well as we thought
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but it is going we are going there i globally it happens you can't overnight change things
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but apart from ibc working itself but uh is one part of it the other part of is this the
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a banker started using ibc as a threat so the corporate captains were actually staying away
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from the bankers running away from the bankers they were coming back to the discussion table
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and they were which was not the case earlier so the bankers or it is advantage bankers now
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because you are running the risk of losing your empire so you are you are no more running away
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and escaping the bankers you are coming and discussion table so ibc uh par se may not be
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extremely useful but the threat of ibc was useful and in the past few years most of the banks have
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done a lot of provisioning they set aside money for their bad loans so when they start recovering
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the bad loans there they will what you call technically in the money because we have already
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provided for so the money comes it adds to the balance sheet it adds to the profitability
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so by january february one year before we thought first phase bad loan recognition is over second
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phase will gain steam now the recovery of bad loans and once the recovery thing their balance
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sheet will get stronger and they will come back to the credit path credit growth path
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aside they have learned their lessons bankers will not do the mistake anymore
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and the kind of political pressure and phone banking i think it's it's there could be always
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pressure to give money to msms and certain segments and all but industry there could be pressure to
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give money to certain industries but i don't think there's any pressure to give money to industrial
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lists as such some maybe still use their clout in a different way but i would say that phone banking
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etc is history now so things were pretty good but now covid has changed the scenario again
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and we found that moratorium which is three months from there to six months then we found
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supreme court coming in so on and so forth and while the bankers are saying that our
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collection efficiency has gone up to 97 98 percent we are pretty good but we have seen the reserve
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bank of india said it's half yearly the health check the reports last report said that actually
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actually the by september the next year september the bad loan can be doubled so rbi i would give it
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a credit to rbi it's pretty frank in its assessment that bad loans can go up so what is the scenario
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now it's pretty opaque i don't have the answer because i'm taking the bankers at a face value
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i am not convinced about the what the bankers is we need to wait after this how much to what extent
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the bad loan will come back will it continue to haunt us or it is not as bad and if we go by
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bankers what the bankers are saying that things are not very bad so if we take rbi what rbi is
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saying things will get worse if we believe the bankers things are not as bad as rbi is projecting
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that's the bad loan front about the structural issues i think the bankers have learned they have
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gone through a hell they will not make the same mistakes again so they are a chastised lot for
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whatever pressure etc and other things they have gone through now and as i said the the books spoke
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about the kind of pressure from investigative agencies etc they have gone through i think the
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bankers are gone to the other extreme they are becoming risk-averse they are not willing to lend
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so on and so forth but those kind of ever grinning and doing a favor to corporate india and doing
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things blindly i don't think that's going to happen anymore and the third piece of it the entire thing
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can be done different way i think by announcing two banks to be privatized to public sector bank
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by giving a sikh laxmi vilas bank to a foreign bank of course is india subsidiary foreign bank
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so these changes we are seeing from reserve bank of india and from the government of india
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earlier it was an anathema that any foreign entity will pick up a local bank yes dbs is india
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incorporated subsidiary is taking but still it's a foreign bank subsidiary has been allowed to take
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over a local bank it's under litigation now but hopefully it will go it will come up it will go
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to the dbs and similarly the government has spoken about budget has spoken about two banks
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being privatized so i think the structural infirmities now being addressed we have a
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proactive regulator and we have a government who has realized that for long we have been talking
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about now let's walk the talk so overall if you ask me i'm hopeful barring the impact of covid
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who is telling the truth is rbi assessment correct or the bankers assessment correct we need to
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figure out but structural issues are being addressed bankers have learned their lessons
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and i think the worst is behind us yeah that's that's a great summation and it kind of struck
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me that what was going wrong was going wrong at two levels and at one level which is a sort of a
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micro level things got fixed in the sense you had greater accountability a lot of these lacuna which
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uh banks and crony capitalists were able to exploit have been done away with but to me the
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more important layer was a broad structural layer which gives those big incentives and like you said
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there is progress on that as well with the privatization happening and uh all of that so
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so yeah so on that note of hope and by the way you you you mentioned i think the criminal
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investigations into all of this and i should point out to my listeners that there are a few
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scenes in your book which are set in arthur road jail as well and there's a lot happening so kindly
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you know this is totally web series material but tamal i have to thank you again for being so kind
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and giving me so much of your time and sharing your insights thank you i mean i'm very impressed
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the way you have read the book not too many reviewers or not too many interviewers have done
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this kind of homework i must thank you thank you so much
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if you enjoyed listening to this episode hop on over to your nearest bookstore online or offline
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and pick up pandemonium the great indian banking tragedy by tamal bondopathyan you can follow
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tamal on twitter at tamal bondo i'll spell that out for you at t-a-m-a-l b-a-n-d-y-o you can follow
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me at amitwarma a-m-i-t-v-a-r-m-a and you can browse past episodes of the scene in the unseen
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at scene unseen dot i n thank you for listening and be careful how you spend your money
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