IDBI Bank’s Bad Loan Mystery

Sucheta  Dalal


Can the Bank employees shirk the responsibility of bad loans
Ten years ago, IDBI Bank was allowed to clean up its books by transferring bad loans worth Rs9,000 crore to a stressed assets stabilisation fund. But, since then, the Bank’s reckless advances and continued mischief has brought it to a point where bad loans have risen to a massive Rs18,000 crore again. Ironically, the All India Bank Employees Association (AIBEA) has opposed IDBI’s privatisation on the grounds that most of these bad loans were extended to private business.
It is time AIBEA shows some economic and financial sense. The market valuations of private banks are significantly higher than those of PSBs while their bad loan portfolios are relatively small. Private banks are under shareholder scrutiny while PSBs are being abused by politicians. Privatisation and stock options may be a better deal for PSB employees and also for taxpayers. More importantly, unions can no longer claim innocence or distance themselves from bad banking decisions. AIBEA, as the largest union, has workmen directors on the boards of most banks. Surely, their job is to protect the interests of banks by paying attention to poor lending decisions too. It is time we start asking nominees of RBI (Reserve Bank of India) and trade unions on bank boards what they had done to prevent bad lending decisions. Did they write dissent notes? If not, why should they not be held equally accountable?
Among the officials who are under CBI (Central Bureau of Investigation) scrutiny is Yogesh Agarwal, who went on to head the Pension Fund Regulatory Authority of India (PFRDA), soon after the Rs900 crore loan to KA was pushed through. Even at PFRDA, Mr Agarwal set about undoing the structure of the New Pensions System (NPS), whose main flaw, until then, was the failure to recognise the need to incentivise distributors. When will we begin to hold people in power responsible for the damage they do to the system with their collusion, connivance, corruption or silence? Each of the entities mentioned above has contributed to the massive bad loans estimated at around Rs8 lakh crore by the government.
At Moneylife, we are aware of several smaller bank unions that do act as whistleblowers and aggressively protect banks’ interests. The Central Bank Officers Union and Dhanalaxmi Bank’s Union are two that come to mind along with the Subhash Sawant-led The Indian National Bank Employees’ Federation at the Central Bank of India. Interestingly, Mr Sawant has filed litigation in his effort to make the Bank’s chairman and executive directors more accountable for bad lending; but his effort finds little support even from RBI. Worse, in a vindictive action for trying to highlight the bad loan issue, the Central Bank’s management has even tried to freeze his retirement benefits. If whistleblowers who are trade union leaders face such pressure, one can only imagine how any dissent by lone officials is crushed by banks.

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