Jail the bankers, nothing less

New Delhi : The small country of Iceland with a population of 333,000, convicted and jailed 26 bankers from 2010 to 2015 for market manipulation and breach of fiduciary duties. They are doing time in jails for non-violent crimes. Can we ever imagine something like that happening in India with a population of 1.2 billion? The pressure of those 333,000 was so much on law enforcing authorities of Iceland that immediate time bound investigation and sentencing had to be done. But what about the responsibility of sucessive Indian governments? Do the voices of Indians matter so little to them?

Since 1969, the management of Indian banks has come into the hands of the government. While the goals at the time were lofty such as giving credit facilities to agriculture and encouraging new classes of entrepreuners, the past two decades have shown that there are systemic flaws which have been used by crony capitalists to bleed the banks dry. And, it is tax payers who are bailing out these corrupt and inefficient bankers. Punishing them is a far off thing. There has been no real governance of banks for as long as one can recall.

What is the qualification and/or incentive for bank managers of public sector banks for making sound business decisions for the bank, when going against seniors or bully politicians can invite censure? It isnt just fear that led to wrong decisions being taken as is evident from the events of recent weeks with regard to the bank frauds of Nirav Modi and Rotomac. There are security breaches, over reliance on precedence, influence peddling, fudging documents, misleading investigators and more important than all, complete confidence that they will not be going to jail.

The culture in state-owned banks is of "I'll Be Gone, You'll Be Gone" (IIBGYBG) by the time all this comes to light. IIBGYBG is what American hedge fund managers used to say to each other when they played around with an investment mechanism that led to the financial disaster of 2008. Sophisticated derivatives were used to borrow money to make investments that created higher returns in a good market but when the stock market downturned in 2007 the multi-billion-dollar hedge funds faltered and soon enough the U.S. and several other economies were exposed to the domino effect and a biggest global downturn since World War II took place.

The western economies were strong enough to withstand the crisis while their governments bailed out the banks. In the US, 402 individuals face criminal charges including 97 bankers. 222 were sentenced to prison. In the UK 13 were charged, 8 acquitted, 4 found guilty and 1 pleaded guilty.

Where are we headed? Answer: we are headed for elections. That is all that seems to matter. The media will soon lose interest, the bureaucracy will go into a hold mode, while politicians begin their campaigning for state elections and general elections and the banks will continue to do what they do, because they have been given more money to play with.

It is pertinent to remind bankers to recall that they are inheriters of the legacy of Lala Lajpat Rai who was one of the first promoters of Punjab National Bank. Or even more recently, of R.K Talwar, the trail blazing chairman of the State Bank of India, who during Emergency in 1976, told Sanjay Gandhi to take a walk! The Prime Minister's son wanted SBI to waive conditions for a loan to a cement making company whose CEO was a pal. Talwar said no and even refused to meet Sanjay Gandhi, saying he had no constitutional authority. Gandhi used every possible tool to fire Talwar, including the CBI (yes that caged parrot) and even a Parliament amendment to sack him.

That is the level of commitment that tax payers in this country deserve from its bankers. Bankers whose salary they pay for with their taxes. And those who have plundered the banks, which is the hard earned money of tax payers need to be brought to book immediately. The rogue bankers should be jailed and made to serve time. We need to see them suffer the consequences of their actions. If this doesn't happen soon, they will continue to gamble with public money.

Because these Public Sectors Banks have the security net of 'being too big to fail', the bankers are supremely confident that whichever government comes to power next, their jobs are safe and they will survive whatever wrong doings they do and abett. Bankers are being compensated for illogical risks they take with with public money, money which is ours, not theirs.

It is high time that their acts are treated as criminal offences, not merely financial irregularities. The abuse of public trust must not go unpunished. We expect this from the NDA government which came to power with the promise of cleaning corruption from governance.

Mr. Prem Prakash is Chairman of Asian News International