“Crony Capitalism, is the real anti-national act; Expressing dissent is not” began Prof Babu Mathew, who was speaking at the 10th Tarakeshwar Chakraborthi Endowment Lecture 2016. “It is like a day light robbery and don’t think of just Vijay Mallya, he is a small fry in this game, these people and institutions are so powerful that even RBI can’t reveal their names” he continued. Posing the question whether Indian banking sector will succumb to crony capitalism, he pointed out that the importance of regulating the financial sector to prevent collapses and defaults by banking institutions that might severely impact the economy. “It was the left parties and the unions like AIBEA that prevented the deregulation of the banking sector” he said. He also strongly commended the Indian constitution, calling it a transformative document, which was also under assault by both the religious right wing and the proponents of Washington Consensus.
Tarakeshwar Chakraborthi Endowment Lectures are sponsored by All India Bank Employees Association (AIBEA). Hosted by the Economics Department of University of Madras, it is in the memory of one of the architects of bank employees union in India. AIBEA is also organizing the HL Parvana lectures at JNU and Com. Prabhat Kar lecture at Jadhavpur University. More are being planned. Speaking about these lectures Com. E. Arunachalam, General Secretary of AIBEA said that these endowment lectures help take the message to students and enlighten them on the crucial question of political economy before us. He went on to add that AIBEA might even consider establishing a research fellowship for the study of Indian economy and the banking sector. “Tarakeshwar Chakarborthi, was one-of-a-kind leader, he was a great organizer and worked to unionize the banking sector from the pre nationalization days. His untiring efforts resulted in the growth of AIBEA. He was also a great visionary who saw that the needs of the majority of Indians for financial inclusion could never come from the privatized banks. That is why AIBEA along with the left parties were the earliest proponents of Nationalization of Banks” he said. Commenting on the present condition post liberalization, he said that AIBEA was one of the earliest organizations to call out on the raising Non Performing Assets(NPAs) and willful defaults. “Tarakeshwar was one of the pioneers of this effort to reveal the willful defaulters, which the banks were very hesistant to reveal. He went out and released loan defaulters list, challenging the banks to take action. Now it has become a regular practice of AIBEA to release the list of the largest defaulters”. Click here for the latest list released by AIBEA
Prof Babu Mathew, a labour lawyer, a children rights activist and a visiting faculty in law universities, maintained that robust constitutional institutions and their independence alone was the safe guard against crony capitalism. Citing the distress in agriculture sector due to poor financial support, he juxtaposed it to the large rope given to corporate companies who run huge defaults while the government and the people carry the burden. Discussing the history of banking in post independence India, he marked three phases, the post independence phase from 1947-69, the post nationalization phase from 1969-91, and the post liberalization phase since 1991. He said that during every phase two contending visions of banking emerge, one which demands regulation and public good through financial sector, and the other that seeks growth, serves monopoly capitalist interest and demands de-regulation. The second is championed by the International bankers through the Washington consensus. The policies of IMF and World Bank are pushing through structural adjustment programmes to force open economies is an expression of this vision. “ after the initial reforms to allow for privatization and entry of Foreign investments, they begin to seek financial deregulation through reforms in the sector. If we go with them, it will land us in grave danger as we will have no control over the banks. The left parties and the unions have stalled these reforms when they had power within parliament. That was the safeguard during the recent financial melt down that protected our banks. But if the present government is able to take control or find a compliant Governor for RBI then we will lose this security.”
But he also reiterated that our institutions have withstood governments and other influences and have proved their robustness. He hoped that Governors of RBI would continue to defend the core principles of banking against the demands and wishes of governments and crony capitalists for cheap and easy credit as a way to boost growth or profits. “Sickness (in industry) has become a good business in India, the rising NPAs suggest that clearly. AIBEA is a whistle blower, but then Raghuram Rajan and the likes, warn us against blowing the whistle too hard. But when banks such as IOB has almost a fifth of its loans going bad, what more should one wait for.”
“A life cycle of a Regulator goes through three stages; Youth when they are vigorous and active; Middle age when they begin to socialize too much with those they are regulating and maturity when they become incapable of decisive action. We call it Regulator Capture, when the very people who are to be regulated, like the big banks and corporate debtors capture the institution. It is very important that this does not happen and RBI retains its independence”
Digressing a bit, he also addressed the assault on the constitution from the likes of Govindachari of BJP and warned of the need to safeguard the constitution. “Our constitution is a transformative document for a nation of such diversity. It assures civil and political rights and enshrines equality. It guarantees ownership of natural resources with the people through the state and its use for public purpose only. It focuses on building a socialist nation.” But he felt that it was now under threat from the forces of Washington Consensus, that want to enshrine neo liberalism at the level of the constitution. “to fight this trend we need to reach a large section of people, confront these ideas at the intellectual plane and also take these debates to the people. I am happy that unions like AIBEA are doing this” he concluded.
(The lecture was held on 17th August 2016, at University of Madras and was organized by Department of Economics. The lecture was delivered prior to the selection of Urjit Patel as the incumbent Governor of RBI)