Loan scams endemic to finance capital : The Tribune India

Aunindyo Chakravarty

Senior Economic Analyst

TILL a few years ago, Chanda Kochhar was a celebrity. She graced the front pages with her opinions on the state of India’s economy. On every Budget day, TV channels vied for her time to find out whether she thought the Finance Minister had got it right. Now, she has been arrested, allegedly for taking kickbacks to give big loans to the beleaguered Videocon Group. Kochhar is not the first famous banker to be arrested; a couple of years ago, Yes Bank’s Rana Kapoor was taken into custody on similar charges of taking bribes to facilitate loans to corporates, many of which could not be recovered.

The allegations, if proven, should not surprise anyone who has followed India’s NPA (non-performing assets) or ‘bad loans’ crisis, that has unfolded over the past decade. Banks, mostly in the public sector, gave out huge loans to a wide number of corporates to finance big projects. A large number of them turned out to be unviable, and the companies stopped paying back their loans. Even when these mega loans were being sanctioned, there were rumours of corrupt practices, of a nexus between politicians, corporates and bankers. Public-sector bankers would allegedly be told by the political masters to issue loans to their corporate cronies, without proper diligence. In return, the bankers would get a share of the kickbacks…