 Hello and welcome to News Trip. The recent notification of the Reserve Bank of India about the framework for compromise that we mentioned technical write-off has picked up a storm in the banking industry. There are two major unions, the All India Bank Officers' Confederation and the All India Bank Employees' Association, as opposed to Moon, which they claim to be in favor of the evenful defaulters and the fraudsters. To discuss more about this, we have with us Mr. Thomas Franco, the former General Secretary of the All India Bank Officers' Confederation. Welcome sir. So to begin with, the circular has picked up a storm and both the AIBA and IBOC has opposed this. So in what context are these two organizations opposing this, given the increasing list of defaulters and fraudsters in the public sector balance? Well, it's not only the All India Bank Officers' Confederation and All India Bank Employees' Association, Bank Employees' Federation of India has also opposed this move and a number of economists have raised their voices. The People's Commission on Public Sector and Public Services has also returned to the Reserve Bank Governor asking him to withdraw the circular immediately. There are a few members of parliament also have already raised this issue. The Congress Representative Jairam Ramesh has also asked that this should be withdrawn. Jawahar Sarkar from Tarnamul Congress has written that it should be withdrawn. So there is an overwhelming opposition to this move for the following reasons. Number one, all along the willful defaulters as well as the fraudsters have been categorized separately. A defaulter who is finding it difficult to repay the loan because of certain circumstances in the business or in the family, he has to be treated differently from a willful defaulter who is one who has the money to pay but he is refusing to pay. Similarly, a fraudster is one who has cheated the bank using false documents, false statements, misusing the money for a purpose other than for which the loan was given. These all have been listed very clearly in 2003 in an RBI circular itself and that time RBI had clearly stated that these people should not be permitted to have any access to the banking system, any other banks also. Now banks are more interconnected but even in 2003 they had said that once a willful defaulter or a fraudster is committing this kind of mistake, so between the banks that should be sharing of information so that they don't misuse other banks to get the fresh loan and again go into trading. Unfortunately, the circular dated 8th June has gone back on everything. It says that the banks can have a compromise with willful defaulters as well as with the fraudsters. This is totally illegal because you are asking to deal with a criminal as he is a good person. In both the cases these are criminal offenses and banks have been earlier instructed that there should be criminal proceedings initiated against their company as well as personally against them. But now suddenly they will be asked for compromise settlement and they become good people and this creates a total lack of faith in the system itself. A person who is honestly repaying a loan, he will now start thinking why I should pay promptly when somebody who is a cheater is given a compromise. I also have genuine difficulty why I cannot be given a compromise settlement. See, lots of youths who have availed these education loans, they have not got a job or they have got a job which is not paying adequately and they are finding it difficult to repay the loan. We don't give that concession to them. There are crores of farmers when they are affected with certain calamity, maybe flood or drought, who find it difficult to repay the loan. We don't give them a concession. Instead we put pressure on them to repay the loan and they have led to number of suicides which we are aware. So the opposition to this circular is quite valid and the reserve bank should withdraw this circular. Otherwise it is going to create havoc in the banking system. So the new notification has mandated the approval from the board of directors to arrive at a compromise. So will this play a crucial role in ensuring that these compromises are, I am not sure whether this word compromise itself is fit to be used in these cases. But whether this board of directors will ensure that large sum of the money is recovered from the defaults or the fraudsters? We should first look at the composition of the boards of the banks. Till 2014, there were representatives from the unions and associations. Legally mandated, there has to be an officer director and an employee director. And they are supposed to be from the majority union represented in that bank. That was doing well because they could also play a watchdog role. When they attend the board meetings, they get all the papers including large loans granted, large loans proposed for write-off, all these details that comes to their hand and they immediately quickly look at it and respond. See, they too may not be able to block any decision that easily, but they could always put up a decision note which will shaken the management. But today, after 2014, there are no officer director, there are no employee director. 2017 as general secretary, I filed a case in the Delhi High Court. It is getting dragged even now. The government keeps on asking for extension for the last six years. So that is one side of the board. Secondly, the board of directors, the so-called independent directors appointed to the board, they are politically connected. It is the finance ministry who decides who has to be an independent director. And surprisingly, just one week before, the Reserve Bank governor was addressing the board of directors of different banks where he has said that votes are not functioning properly. There are a lot of greening of the balance sheet. And the deputy governor of the Reserve Bank of India was saying that you are not doing your role. And it is high time that you tighten your belt and see that banks are taking the right decisions and votes are meant to take very right decisions in the national interest. So the votes today are opaque. There is no transparency. You cannot get any information under the RTA even. And even to the parliament replies, they say that no, this is under the official secrecy act. So we will not be able to give. So the board of directors, what now practically will happen is that they will quickly sit around, ask for a list of defaulters for whom compromise proposals are put up. And they will quickly return all this note. So you mean to say that we have already seen a lot of frauds in the last five years or a decade. So with the introduction of this compromise formula, these numbers are supposed to grow and we can expect more losses to the public sector banks in the coming years and leading to privatisation as well. Exactly. See, this money is not the government's money. The money belongs to the depositors. Banks have been writing off. In spite of that, they could make profit. But now there is a very suspicious angle to that I am seeing. In the last eight years, starting from 2016, the Government of India introduced the Mudra loans. These loans are meant for small enterprises in the free or small trade. And the official figure given in the Government of India sites is wine boggling. In eight years, we have disposed 42 crores loans to individuals and the loan outstanding is 24 lakh crores. From the beginning, we have been saying that, well, we welcome support to the small enterprises. The entrepreneurs have to be given support. But let banks do their job, which is within their own purview already. You didn't require a new scheme to be announced. Banks already had traders' loans. They had the self-employment loan. They have the MSME loans. But beyond that, these people announced this Mudra loan, which is with a maximum of 10 lakhs to a borrower, where total politicisation was taking place. I was leading an agitation in Chennai when I was the IPOC General Secretary when these loans were disposed through a central minister in a marriage hall. And the ruling party, that is, BJP functionaries who were sitting in the stage, similar thing was happening across the country. And again, I had opposed in Tamil Nadu from the IPOC State Committee when there was an arrangement in Chennai city where BJP flags were put up and BJP functionaries were sitting there. And branch managers were asked to sit there and collect the loan applications. This is in South. And we also know that there was BJP started one exercise that people can apply for loans through their own website. Now, probably it is not functioning or maybe it is functioning also. But in the Northern States, when I have enquired with colleagues, it is much more. So total politicisation of this scheme was done. And while granting the loan itself to the BJP functionaries, we are saying that this is what is this gift. So people were not repaying. And as there was no restructuring available after 2012, the banks were finding it difficult to deal with these loans. They were also put on pressure that don't disclose that these accounts have become non-performing assets. Because these loans were personally monitored by the finance minister. He was conducting quarterly meetings with the heads of the banks, giving targets and giving instructions. Now they say that there is no phone banking for us. What is happening is that personally people are called and they are given instructions. So what has happened is that these loans are becoming bad. Now that 2014 election is coming. Before that, these people want these loans to be written off. So banks have found a new way now. We can say that these are willful defaults. So let us go for a compromise settlement and indirectly pressure will be put on the banks to do that. And that way banks as well as non-banking financial companies which have given loans, private banks, they all clean their books. And all these people will get benefited in a beautiful way. Because now once they are a non-performing borrower, their name in the civil report, the credit rating, they will be under a very poor score. So once the loan is written off, everything is clean, so they can go for fresh loans. The circular itself says that after one year you can give fresh loans. But even that they don't have to wait. Once the civil score is clear, they can go to any other bank and keep availing loans. So this isn't a political purpose. I think this circular has been brought in so that the banks two ways they are seeing a benefit. One, the large number of borrowers who have availed this loan, their loans are written off. So they can be said that, see, Modiji has gifted you, he gives you your vote. Second thing, once the balance sheet of these banks are clean, the profit goes up and the people in the private sector will be more happy to take over this bank. And when the privatization was on discussion, there had been questions raised. How do we take over these banks when they have a huge non-performing asset? So now it will become very clear that all the books of accounts are very clean. Banks have huge assets, rather undisclosed assets. I'll just tell you one example. Chennai, the Madras main branch of State Bank of India, a heritage building which will be worth hundreds of crores, huge building. In the book value, it is only one rupee because after the depreciation, so some figures will keep it as one rupee. The real asset will be much more. So these people will be very happy to buy the public sector bank. That also I think is an intention behind this decision. So generally, the windfall defaults of the fraudsters have scorned from the country which we have witnessed in the recent years. So that leads to total loss of the amount which has been disposed by the banks. But will this help in bringing at least some percentage of the money back to the banks? The windfall defaults and fraudsters have cheated the bank. Criminal cases are filed. So if the criminal cases are pursued properly, there is a scope for a better recovery than for a compromise settlement. See now what will happen? The people, the large defaults, fraudsters who have run away from the bank like Vijay Malaya or Mahatma Chukshi or Nirav Modi or Jatin Matha and a host of others, they can come to the country and say that we will pay some amount to close this loan and clean our books. So they can again start the availing press loans. In fact, Vijay Malaya once even offered that I will pay the full principal. I cannot pay the interest. Banks refused because he was already classified as a willful defaulter and a fraud. But now he can do that. Same thing, the person who cheated the Punjab National Bank, Mahatma Chukshi and Nirav Modi, they can do that. Jatin Matha, whose family is now closely connected to the Adani, living happily abroad, he can also come back and they will be supporting the ruling party in the election in different ways, electoral bonds or there are many other ways in which they can. My question is that, see, just to recover a small amount, should we spoil the system as a hope? And should we hope for a compromise with fraudsters and willful defaults who are really criminals? So this is an aspect. So in short, this is legalizing the problem activities of the big corporate who have already attracted a lot of such activities. Yes, one side you are helping the large corporate, another side you are also trying to clean the books by writing out the other loans which was stopped after 2012. All this restructuring of loans, compromises, all that was stopped during 2012, saying that this is going to affect the banking system very badly. And Ram Rajal's period, he put up that all that was blocked. Now they are opening up one by one. There are different routes like NCLT and now the compromise proposals so that everything can be written off at the cost of the banks and the cost of the depositors money. And it is mostly the deposits with the banks or the small depositors. Tomorrow it can lead to a collapse of the banking system itself. Thank you sir for joining us. Thank you.