The arrest, on Monday, of former IDBI Bank chairman Yogesh Aggarwal, along with several top officials, by the CBI is unfortunate. Enough research exists on how bank lending grinds to a halt after any vigilance action, leave alone the arrest of a former chairman, and that is why former RBI Governor Raghuram Rajan had cautioned against targeting bank officials, pointing out it could result in an environment in which bankers stopped lending altogether. While it is likely bankers such as Aggarwal have lent without adequate due diligence, any probe must also investigate the directives to them, if any, from concerned ministers and bureaucrats like those in the finance and aviation ministries. It is no secret that industrialists have thrived on their political connections helping them win both licences and loans. As Rajan had pointed out, many of them are freeloaders who have no intention of returning the money they have borrowed; they have been able to get away purely on the strength of their clout in the government. If industrialists have been able to flout rules with such impunity, it is only because they have the backing of those in authority.
In the aviation sector, the favours bestowed to select airlines, sometimes at the cost of Air India, are no secret. In the Kingfisher episode, similarly, it is odd there has been, so far, no mention of any politician and it is hard to believe ministers/bureaucrats played no role in the sanctioning of loans to Kingfisher Airlines. The former IDBI Bank chief has reportedly been arrested for accepting the Kingfisher brand as collateral even though the airline was already in trouble, but surely it is odd neither RBI nor the finance ministry thought it fit to take action at the time or even afterwards? Also, it is not clear whether the IDBI Bank loan was part of a larger bailout to save the loans given by all other banks to the airline.
25/01/17 The Financial Express
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In the aviation sector, the favours bestowed to select airlines, sometimes at the cost of Air India, are no secret. In the Kingfisher episode, similarly, it is odd there has been, so far, no mention of any politician and it is hard to believe ministers/bureaucrats played no role in the sanctioning of loans to Kingfisher Airlines. The former IDBI Bank chief has reportedly been arrested for accepting the Kingfisher brand as collateral even though the airline was already in trouble, but surely it is odd neither RBI nor the finance ministry thought it fit to take action at the time or even afterwards? Also, it is not clear whether the IDBI Bank loan was part of a larger bailout to save the loans given by all other banks to the airline.
25/01/17 The Financial Express
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