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Among the many things we take for granted, there is money, we behave as if the system of money around us has always been there, as if it's as natural as the oxygen in the air. We behave as if it will be tomorrow will be worth the same as it will be today. In fact, we behave as if the financial system around us is stable and immutable, taking it for granted in the same way that we take the circulatory system of our body for granted.


We don't think about our heart ceaselessly pumping blood until there is a problem with it. And when there is, that problem can become life threatening.


Welcome to the Scene and The Unseen, our weekly podcast on economics, politics and behavioral science. Please welcome your host of Environment. Welcome to the scene in The Unseen, my subject for today is our ongoing banking crisis, and my guest is the Melbourne author of the Superbook Pandamonium The Great Indian Banking Tragedy. India has been in a financial crisis for a while now. A banking system is damaged. We have an NPA problem, and this whole mess is a structural issue beyond any specific political party or government.


I've done many episodes on different aspects of this and they'll all be linked from the Señores. And if you care about the subject, you must read Pandamonium. Tomorrow is India's most highly regarded banking columnist. He was part of the founding team of the newspaper, meant he has held senior editorial positions in various newspapers and he's written a number of exceptional books. Pandamonium is particularly enjoyable because it's like many books. In one, it features riveting storytelling with colourful tales of wild fraud's and evocative scenes from Arthralgia.


It features incisive analysis in simple language that will make you feel like an expert at the end of the book. It features long interviews with four central banker C Rangarajan, widely read Subbarao and Raghuram Rajan, which alone are worth the price of the book for the insights and their self aware criticism. I was delighted when Kamal joined me on the scene in The Unseen and for me, honestly, the most rewarding part of this conversation. Again, before we even started talking about banking, listening, and I'm sure you'll agree with me.


But before we get to our conversation, let's take a quick commercial break. We live in a world of money and we need to understand how it works. I'd like to recommend an online course that will help you do just that. Hop on over to the sponsors of this episode, the great courses plus at the great Kosice plus dot com. And check out a course called Money and Banking What Everyone Should Know by Michael K. Salemi. Over 36 chapters course takes you through the origins of money, the history of banks and monetary policy, and understanding of stock markets and personal investing and a demystification of interest rates, stock market bubbles and exchange rates.


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Thomas, welcome to the scene on the scene. Thanks, David. I mean, I'm a bit nervous, but anyway, I it.


Why would you be nervous? We've lived for the last few months with the fear of this virus. So why would one worry about the broadcast? You know, there's a lot I want to talk with you about, and I've been looking forward to this. But before we start, tell me, how have the last few months been for you? Like, how have you managed during covid?


Yeah, it's not an easy thing because I'm a person who travel a lot. I'm in probably 15 days a month, if not more, not overseas, primarily within India and a bit of overseas once in a while.


So that's the kind of lifestyle I have been maintaining for the last five years. I would say, yeah, 2014, five, six years when I left my regular job.


So for a person like me suddenly confined at home in the second week of March 2020, I had my last trip just before the covid started. And yeah, it was pretty pretty I mean, one problem was being confined at home and, you know, my homes are not large.


You don't have got in, you don't have a lot of the luxury which you could afford probably in some parts of Delhi and other metros.


At home, me, my wife and a dog bit. One concern sarnies overseas, U.S. and U.S. idea is pretty bad, he's doing his best in economics. So that's the worry being a parent was there and claustrophobia within this?


No. And most of the time I was confined into my studies, which is a very small place.


But on the positive side, I could because of the cubitt, I could finish my latest book in record time.


So I probably work 16 hours a day because most of the traveling conversation, everything is over by March. So it was to be written and trust. Do me one like 50000. What? Plus I pulled out within this between March in and.


Yeah, August, March, April, May, June, July, six months. So that's the good part of it.


But part of is that confinement, claustrophobia and the other part, which is very surreal. You know, I have been living in Mumbai with a very small break for a few years from its 35 years from 1985. I have never seen this Mumbai because, you know, I had to take my dog out for a walk. So every day that was a ritual morning ritual for my wife and evening for me.


And I sort of I mean, I don't know, because of my age, probably some days I was in tears. I found Kroos dead bodies of crows, pigeons on the streets. Probably they were not being able to eat.


That's what they are. They're dying. And when as things were slightly getting better after two or three months up to the pure play lock down when it when it started slightly opening up.


I found the kids, which were essentially earlier used to sell balloons on other toys and all, they can do bigger and they are not asking for money, they are just pulling my shirt or T-shirt or pajama and pointing out some bread or milk pouch. Uncle, you buy this for me. You know, I have never seen this in my life in Bombay.


I know you heard about postposition what happened from our parents and all us.


So I mean it was I was in tears and one particular person, you know, in Bandra there's a park where one person I used to find that every day he was covering his face with a bit cover or something that lying there under a tree. I'm talking about March, April, May. And suddenly I found that I used to take my dog out in the park. Even the dog is not allowed. But those days, you know, we used to take him and then suddenly one fine day, my evening, I found that man was he was singing a song, classical music and baritone voice.


I was very impressed, that gentleman. And the next day I found him that he was bowling. There was a wicket he fixed up and there the multiple balls he was trying to bowl. And my dog picked up one of the balls and he he always steals balls when we find. So then this person spoke in just English. Hang on.


Hang on, uncle. Don't worry. Let him have a ball. I have many words.


Then I got curious. I said, who are you? Etc., etc..


I found that he was a law student, but and he was a classical singer as a student of that particular granna. But his hostel, his he was staying in Juhu, his hostel asked him not to be there. So he he came out of this. He didn't know where to go. He managed some four nights sleep at a hot summer. And during the day he was in the park from from eight to eight. Twelve hours. He was just lying down there.


I said, can I do anything for you? I mean, I know in terms of because it's pretty close from my house, he said, no, I don't need anything. What I need you can't give me because food is I'm getting food, free food. I need a place to stay. But you can't give me that. You can give me a place. So there's only one story I don't want to continue for long. So there are many things.


Which actually, you know, I don't know, I found it, it's very surreal, I declare I refuse to believe it, that something can happen either take my car out once in a while in the evening, there's a press sticker on my car. So despite being interrogated at various places and stopped, they did allow me. But I used to take the car out to get a feel different parts of Mumbai in the evening, maybe once a week.


And then I found that, you know, roads I could not recognize which way to go because everything is empty.


So which would drive many any time I drove on the wrong lane, you know, and I found those kind of beggars who are not asking for money, but asking for bread and milk and something else for other family members, etc.. I found this gentleman. So it was very, very disturbing.


I must say, you need to really be strong to be yourself even after seeing all this. You mentioned that you'd heard, you know, similar stories coming from partition points from your parents, as indeed I have as well. And here's a thought that strikes me and tell me what you think about it, which is that there is an invisible city out there that we don't see. And actually there are two invisible cities. And one is the one that in normal times we don't notice it because we have just sort of blocked it away.


You know, it could be the bigger of the traffic signal or all the people we don't notice and who are invisible to us when we are out there. And maybe there's a lot of grief and stuff that we do not notice. And that's one point of invisibility. And I think there's another sort of notional invisible city that comes about because many of these people live really precarious lives. And when you have one little crisis, one sort of little crisis, but even a little crisis can just push them over the edge into another existence, which is hovering over them all the time.


But we don't see it. The crisis comes like you spoke about people, the kids who would sell balloons and all of that. And they're pointing to a kind of packet of bread. So, you know, do you feel there's something to this? And after sort of this experience, like after the last few months, do you feel you're a changed person in some way in the way that you look at the world? Yes, absolutely. I'm getting very emotional.


But I do feel, as I said, it's very surreal. So my parents are not from East Bengal, so they don't have the firsthand experience of this. But I heard from them what happened. We read about it and I'm talking about what I experience, what I have seen on television, challenge's already in newspapers. I'm not talking about that. I'm not talking about the migrant crisis and other, you know, those.


But what I saw in Mumbai, in the western suburb of Bandra, where many, many years I've been living my first day in Mumbai was in Bandra. And in the past 35 years, as I said, bodying an interval at many of the lines I have seen in Bandra. And the CFS is very familiar with me.


I've never seen this, so I don't know whether this has all along been there. And it was because, of course, it just, you know, spilled over to our I would say in our consciousness it was in the subconscious. I mean, I'm talking about it philosophically or it's been there.


We don't notice because there are people, you know, at the traffic signals, this mullahs or somebody selling a box of figs or the books, etc, etc., actually did lead this kind of life. And because of that life that we have of their lives just got in to our seashore. I don't know.


But it is very difficult. You know, there are been occasions where somebody just got hold of me that is there twice it happened.


Two persons got hold of me on my left wrist and a very strong thing and asking for something. He said, I have not eaten. You have to get something for me.


And in one case, I got a little paranoid that is sort of Willy like uses dagger or something and kill me in a gully. He put me there within Bandra and then he said in English, he said, You come on, don't get nervous, you come on and then within the galley, etc.. He took me to be honest, all there are other obedient stalls also on the road. But this was really strange. I was not aware of it and it is better than the other varieties.


And he said, Can you buy any for me? So 150 rupees I paid and I got a be from there. So I have never seen, you know, I would not call them aggressive. I know it's not aggression. It is just like you. You hold onto a straw when you are drowning. So he was making a last ditch attempt. Just probably he has not eaten for a few days that there is a man with his dog probably.


Well, he can afford. Why not. So I didn't have the money, so I, I don't have any seller. This is my mobile number. You take it out, I'll come back and pay you the money. So that's how it happened. So, yes, my my approach to life has changed now, how long it will last, I don't know. Like, for instance, many years back, I went to a yoga studio and stayed for ten days.


And next three months I was a little different person. I used to get up pretty early and seeing things in a different way. I'm not comparing that. But then as I got into the normal routine life, no, it started wearing off. So will this covid impact also a year or two down the line will wear off and I become the same old person, or will it forever stay with me? I do not know. But as we speak, you know, definitely I am not the same person which who was.


Had you spoken to me one year before my approach to life, things surrounding me, definitely different than what I am today.


And another sort of thought, what strikes me, which is also a surreal aspect since you mentioned that word, is that on the one hand you're going out walking your dog and you're going driving and you're seeing all these things which, you know, one would not otherwise notice or one would or it would otherwise not be like this. At the same time, you're writing a book which is about just another kind of reality there. And the thing is, I often find it hard as a writer on these subjects in economics or public policy to really drive home that connection.


Where I say that, listen, bad economics says humanitarian consequences, that all of these things are related. And in your book, you've written about, you know, there are so many concepts in your book and all of those concepts in a way back to this reality that you're seeing on the streets. But that connection can sometimes be hard to make. And, of course, the real people that you write about in your book, you know, including the need of models and of leaders and all of that are just at a different sort of level.


Is that connection something that even you have to keep reminding yourself of the real consequences of some of these bad policies that you're writing about? This is not happening in some artificial universe, all the things happening in banking, but they have a real impact. Honestly, no, no, I don't have that kind of you call it, I don't have the missionary zeal of telling the world, look, this is underneath is this it's not like that as an altar.


I always want to tell a story. And now my last book, which you mentioned, this pandemonium is different because it is a much larger canvas, the pandamonium. What we have been witnessing in Indian banking system earlier this month, six books earlier five books, primarily one was a collection of essays which and the rest was sort of biographical on institutions, good, bad, ugly on shadow banking, on India's finest bank, on a microfinance entity, etc..


Now, this time it's very different because the canvas was very large. There are constituents who are many, and I tried to take a deep dive kind of thing. What has gone wrong and how and why and what the basic principles of journalism.


But I not consciously or unconsciously, I have been trying to relate that and the real world. And we are paying the price for being, you know, not following the governance, etc. in that the world of economics and finance, not as an author.


My simple logic is I want to tell a story and my advantage is probably I'm fairly illiterate about finance and economics because I don't have any kind of background. Or once you have that background, then you go through that prism. I know that theory. I have read this and this Nobel laureate has said that and somebody has said that. I don't go through that. I don't have that baggage of knowledge, if I may put it so, you know.


So I'm like a mountaineer.


I know that I need to carry minimum things, only the oxygen cylinder and a bit of chocolate and those kind of things. And then what I see, what I feel, that's all.


So, no, I do connect the micro and macro. I do try to read between the lines. But my overarching ambition and the mission is to tell a story and that story should be read by everybody. If I say it must be read by your aunt and she should appreciate you, you will hang me for my gender bias. So let me say, you're a teenage boy who would be able to read and understand. So that's the overarching philosophy for every book I follow.


And this book also same thing. Just telling a story. That's actually what you what you said about your own daughter, an eight year old boys, very resonant with me because I teach an online course where one of my slides is about what I call the knowledge test, where I say that if you're writing an op ed or an article, show it to your knowledge or a young teenager. And if they don't read it all the way through, you're doing something wrong.


It's your fault. It's not their fault. And obviously, I'm not condescending to either no. Or teenagers, but the idea is that an intelligent layperson should be able to understand it. And I think this test also helps you avoid what people call the curse of knowledge or what you call the baggage of too much knowledge, in a sense. So, you know, before we sort of get back to where you started and all of that, which I want to get to a related question on this point that strikes me, which is that another thing I see in my writing class in which George Orwell as well used to, I wrote about in a famous American politics and the English language is that the pressure to write clearly makes you think clearly makes you think people, because it's actually quite easy to write about something using jargon and obfuscatory language and abstract concepts.


But when you've gotten yourself the pressure to write clearly in simple language that anyone can understand, then that means you have to understand the subject that much better and go to its root and all of that which shines through in your writing. I mean, this book was such a lovely read and a lovely piece of storytelling, and I'll come back to that as well. But is that something that you have found it because you have given yourself this mandate and not everybody in business papers or all the places where you work necessarily write this much clearly, but because you are forcing yourself to ask basic questions, not worrying about looking stupid or to ask simple questions and to, you know, simplify it for the reader.


Do you feel that that's also helped your knowledge of whatever it is you're writing about? Absolutely. I mean I mean, you have hit the nail.


I think, as I said, my advantage is I don't have the background necessary to be a finance writer, but that actually encourages me to ask stupid questions. But I don't know.


So there are a few principles which I follow while writing my column. Writing used to those days, news reports when I was a reporter and now a column and books.


Even if my writing is only appreciated by the bankers at the community of the financial sector people, then I'm a complete failure.


People of other professions should read the teachers, the doctors, the students who read and appreciate. So I must. Have a much larger base of people, so that's that's one part. Second part is that the element of storytelling that remains also in the in my column also, you know, that connecting the dots, connecting micro and macro, those are the kind of stuff and thought the most it is by default, probably. I do this because, as I said, I don't know.


Basic thing is this. Most of the subjects I just don't know. So what? I ask stupid questions. I end up reading a lot of things and then I'm not embarrassed to ask where they decide to be a governor or finance ministry officials, bureaucrats or bankers. But just explained to me, I don't understand. Can you please explain to me? And they're kind enough because they also probably take pity on me that this person is trying to understand why not.


So I actually play the role of teachers at at various stages of my career. I've got various people who have been continuously playing the role of teacher or interpreter or whatever you call it.


So explaining things even today as we speak on anything, I have multiple people at different India and overseas. I can reach out and I just see that. And they're all eminent people, very knowledgeable people, and they have the fundamental background of economics and finance. I just tell them just can you explain to me wider until such time I am convinced I don't want to write it. So that's something happened in the Bank of India, cut rates or has raised rates or something else happened.


What does it mean for me? I mean only by saying this. It doesn't make any sense. It starts from there. And then, as I said, however difficult the subject is and even the easiest subject also I can understand this is not my modesty. This is just because I don't have the background right. Kind of background. And things are evolving in particularly in finance. Just to be there, you need to run, you know, because globally things are happening so fast.


So I have multiple teachers at multiple geographies for multiple subjects. And I am I'm not embarrassed to expose myself. I tell them that, look, please explain to me.


And which is why probably an intelligent person and a person with the background probably want to take one hour. I may end up taking four hours, four times more. More, but that's the price you pay. No, that's that's very inspiring. And I'm going to take a brief digression for my listeners and point out that, you know, Tamala said that he doesn't write for the banking community only and he wants everyone to read him. The fact of the matter is that all the journalists that I have spoken to that you know, who have ever mentioned you in conversation and all the bankers who are talking about you have nothing but the highest respect for your work, you know, which is a tribute both to clear writing and intellectual humility.


However, no turning back back to tomorrow. I've got to tell you that in today's episode, you are going to be on the receiving end of stupid questions, because this is a subject which I'm treating you as the expert. And then I am going to ask a bunch of simple questions and get you to simplify. But, you know, before we get to the subject, I'd like to know a little bit more about you. One of the things that I was fascinated by at the start of the book is when you mention where the title of Pandamonium comes from, which, of course, comes from Militants Paradise Lost.


And then I looked you up a bit more than I realized that you have a master's degree in English literature from Calcutta University. You enjoy reading a lot and in fact, wrote a book that other references that you not sure that you don't fit the stereotype of a financial journalist who studies and finance all the time. You are imbibing culture, whether it's music or writing and all of that in different ways. So tell me a bit about, you know, what kind of a young person were you growing up?


What were your influences? What did you want to be? You know, obviously a significant part of your love of storytelling comes from I presume, comes from your love of literature. But tell me a bit about, you know, you before you become a financial journalist.


Uh, well, you were pretty disappointed, actually.


I don't have any interesting background.


I come from a small town, uh, which is 110 kilometers away from Calcutta, a place called Maidenly, but they call it Midnapore under the British regime where that could eram the matter, et cetera, et cetera, was there and from a. Yeah, I mean, it'll be a charitable way of calling ourself a middle class family because we could eat rice both the times because those days I'm talking about 60s. My uncle's family used to eat chapatti at night because they couldn't afford rice was more expensive than after we had rice both occasions and not every Sunday, but some Sundays.


Mutton curry being all the typical thing and focus on studies. That was the kind of stuff there that we used to sit on the floor and eat our dinner and should talk about Cricket Australia. That was the I think India stepped in there and multiple other things.


So it was a very and there is no what do you need know the middle class Bengalis will be on every summer vacation. They will take a long distance train and go on a holiday and buy books from Williston's. It is not like that. I was the youngest and by the time I was in high school, my father retired. So I and I was of the for the youngest one. So I was I was never pampered. Typically the youngest child is, but I was never pampered.


Yeah. That was the thing. I was not a mom, but yeah, there was passion to read. One of the ways of reading is, you know, was those days in was Bingol. There's a lot of cultural competitions. So the so-called extracurricular activities and used to get prizes, books. We can't afford to buy books even for my regular school books. We never got new books we could not buy because financial or not, that as I said, that's the scenario.


I was not exactly a brilliant, brilliant student, but I manage free school, free students, both college, school, etc. So one of the ways of getting those books to read, which you would like to read, is to get into the competition and win the awards.


So that's sort of a very, very I think from the age of five or six or seven, I started doing that, which is recitation, eloquence, debate is the writing, writing poems, short stories, even drama. You know, I started acting at a very young age, then directing also. And all along in my school, college, university, I was a cultural blue getting old. I was not in the music, but that's so that was one side of it.


And so that opens the door. And that also makes you sort of independent. I would say not. And what do you want to do? You want to do not others what they are doing it. But those days when you study English literature and not an extraordinarily brilliant career, their options are two. One is you become the big go for civil service or you go for teaching.


That was the standard thing. I was also toying with those kind of ideas. And then and then a series of accidents started. In a sense, somebody saw the Times of India and looking for apprentices, journalists, trainee journalists through a series of tests, etc. one could go there. So somebody saw the advertisement in Statesman and said, why don't you apply and try that? So you had some tests, etc., etc.. The final tests in Mumbai and coming to Mumbai by Gitanjali.


Thirty two hours. I had nobody in Bombay. I got out of the station from the end of that year and then I had I remember I had a baatar, not star to a brown color. I got it polished and with the smartness I got into a taxi to take me to Times of India, which was a one minute walk just across the road. And the taxi guy looked at me and then he took me to the Reserve Bank of India.


So I think my turn right turn right, and then came back on the road and dropped me at the time. So I gave my test set.


And then to cut a long story short, I got in there. So it's purely by by accident. I became a journalist. I saw all these guys on typewriter facing the wall and doing I thought, oh, God, it's all the full of typewriters. Where are the journalists? That's not like him. And then a few years I went there doing writing stories, book reviews, film reviews, Alcoholics Anonymous and Narcotics Anonymous, nothing to do with finance.


So first accident becoming a journalist, second as a real accident. My father had an accident which was pretty fatal. He did survive for a few years. And then I took a call that I must go back to Calcutta and but Calcutta Times of India did not have any kind of vacancy. So I was put in Economic Times desk and that's how I was introduced to steel and the and those are the kind of things juked in Calcutta.


Those are the kind of stuff I didn't like it much. I was not enjoying it. I was writing Illustrated Weekly because so little money you get to survive, you you need to do a little more. And on a. Is the writing and illustratively already, I started writing in Bombay, so I used to I was married but hardly at home. I was doing night shifts in office and during that time I was all over West Bengal doing stories for illustrated weeklies.


So that's so.


And then by then I from shifted to cut a long story short into another paper and they put me into feature writing and then they asked me into writing. Of those days, trade unions were very active in West Bengal. So why don't you try do union and through trade unions? I think 94 I smell banking because the two biggest trade unions, EIB for employees and the A, B or C for officers, both were in Calcutta and they are very powerful.


I still remember Takashi Chakraborty was the EIB as general secretary on his table there, a trophy which is Air India or Indian Airlines flight, because he used to spend the maximum number of hours in a year in the sky. So I used to get that those days and frequent flyer that whatever, the longest time in the sky, that kind of thing. And his people are, they are everywhere in every bank. So I used to share with me from his God, real me that he will open up all those papers and all.


And as I said, I do not understand. So I used to figure out how to appreciate how to know things. That's how I was in mid 90s, post liberalisation and all the banking rules, etc. I was introduced and then I came back to Bombay. That's how I got into banking and then from a reporter. So every everything, as I said by accident, then from there into book writing also Guy got into accident. Somebody once the publisher approached me, he wanted to get a book on something and that's how I got in there.


And then now I have 114 in the industry as an advisor, etc., with the entities, again, like by accident. So nothing has been planned to answer your question that did I actually prepare myself for this entire innings? No, I just got into the floor and I believe one is you must enjoy what you do. So I enjoy what I do and then I find ways how to do it good. And second part of is this I think it sounds a cliche, but the actual learning happens outside the classroom.


So you you said I'm a student of English literature. That bearing is there in the background. That helps me to understand things in a different way, in the context and all but all the other things I just pick up as I move even today. So it may sound little pseudo modesty that if I say I'm a student, but I am a student and I mean it fascinating.


There are many strands I'd like to pick up. But first of all, I should mention that I got a warm glow when you mentioned nothing about getting books as a prize, because my father, who grew up in Calcutta and as you know, 20 years older than you, he was born in 1941 and he's mentioned how during his students years they would give books as prizes for everything and he would try to just win books all the time. And I wonder if that's something kind of uniquely Bengali in the sense that immediately there is great appreciation of books and knowledge and all of that, which is kind of coming from there.


And it also strikes me that something like that is not possible today because books are so much more accessible, which is wonderful. But does that also mean that we value them less? I would hope not. But moving on to sort of your growing up years, again, before we get to your journalism, what would the sort of kind of books that you read? What were the writers that you read? Like, I'm sort of trying to understand that when you begin this journey of yours as a journalist, who are your influences?


Do you think that or I should write like this or like that or like that, are you actually thinking of sort of writing is your calling or are you just by accident, as you said, you came into journalism and you know how to write so it fits? Well, what would those kind of early influences, what was your view of the world at that time?


No, no, not really. If you want you want me to articulate answer, I have to figure out what to answer. But if you want to be honest, no, absolutely. I don't think there is any role model before me. And also, while reading like in school and colleges, I devoured everything which came on my way. It could be even adult books.


In fact, my father often got me on reading books, which I should not have read, and I did not know that like Lady Chatterley's Lover, I wrote, I read, and then some of the Bengali things, which is in school, seven, eight standard school.


In fact, in the school library. I used to also ask for those kind of books and they said no. And that made me more curious. Then I found out how to get those books.


So I was pretty indiscriminate. What I read. I mean, it was mostly in Bengali, a bit of in English because I came from a Bengali, I was not into English, medium school, etc..


Right. So you'll be disappointed to hear that. So it was mostly. And then, of course, English also because in my family in there, my brother is into civil service and teaching is English, BGT, etc, etc. So there are a roomful of books in English also. So I was pretty indiscriminate.


Whatever I used, I used to devour. That's that school, college, university days. And when I became a journalist, I don't sometimes consciously don't read. I don't want to get influenced by somebody's style, etc.. And here if you ask me, actually I read less, I read less in the last 30 years or what I read is primarily I read for the information what comes on my way because I need to be addressed and all.


So that's 25 years, I would say 1994, 95. I started into this financial sector. So one idea of reading is primarily to get to know things. It's information for information and other parties just to be in conversation. You know, one book is like everybody talks about it. You you have to join the conversation. So you better read it. And thought is somebody said, have you read this? Like, for instance, Fire-fighting know by getting out and three of them that broad.


I read it during this crisis financial sector crisis aliment crisis. No fire-fighting. I wrote something back because somebody said, Have you seen Fire-fighting? There's a lovely segment of charts. I thought, OK, why not? In my book I can incorporate those charts, those kind of charts. Then I, I did fire-fighting during that time before starting my book and then I actually stole the idea of getting the charts are the chapters from there. So just to give an example, right now I am I am reading a book is called Name God, which has nothing to lose and not by money pomoc with that famous physicist who was the discovery of Blaszyk ISO Geddie, somebody said, Have you read it?


Because when I was talking about, look, Kubi, this makes me depressed. I want to understand, you know, not philosophically the meaning of life, etc., but slightly. I want to understand things I'm slightly getting, you know, disturbed, not sleeping well is that you read morning comics calling them God. He was a famous physicist. He is the one of the richest Indian, probably the most richest Indian in us. You will find some answer to your question.


So I'm reading it now. I'm finding it difficult because it's physics theories, etc., etc. So I am slowly, slowly reading it.


So that's it. So there are four or five types of book, but I never read any book consciously to model by writing on them, and neither have anybody who I and I admire many for their writings. But I want to write. I like that kind of that person or that book. No, I actually stay away from this. Yeah.


And I also want to ask you about something which is not related to the subject of your book directly, but like a final question on your personal journey before we get to your books on the subject of your book, which is you just and I've been noticing that while you've been telling me all these stories, you've been bringing in all these concrete details, like somebody took something out from a good Rachael Myrow and all of that, which is wonderful and evocative.


And I'd like you also mentioned that when you first entered the Times of India office, there's a row of people typing away on typewriters. Yes. And sometimes when I look back like I started working in the mid 1990s and I remember when I was in my first job in advertising in 94, I was just for a few months in what was then India's largest advertising agency. And there were two or three computers on my floor, which was a massive, you know, so you had to write things by hand.


And it was just the whole thing was a very complex process. Everybody would be fighting to get to the computers. There was no MS word. There was a thing called WordStar. So just in terms of technology and workflows, everything is different. And how everything is also different in the modern age is that today everything is immediate. Right? Today, the news cycle is so compressed that there is no scope to go deep. Everybody is just catering to the hunger for instant information, the instant fatigue and all of that.


And I understand it's not like journalism was particularly deep back in the day in the nineties. You know, I've had friends who worked in newspapers saying, you know, it's like every day I have to do one story, how can I go deep? But having sort of, you know, build your career in those times and then continue through these times. What was your process as a journalist like in those days? Like, how would you do stories?


What is the approach that you would take? What is the approach that your editors would take and how much has it changed? And what is your view of these changes? Definitely, if I split my career, you know, I would not take the first year. As I said, I was floating into feature writing, doing other things and all. So I got into serious reporting. 94 in 95, I would say Bombay back to Bombay after my little bit of innings in Calcutta and all, so they are the focus always, you know, on on exclusivity.


So you need to you need to get exclusive stories on one newspaper is appreciated or read and talked about is the kind of exclusive stories. And to be honest, I was pretty good at doing exclusive stories. And there are two parts of it, how you get a story and how you write it.


I think how you get a story is true for everything, you know, whether you are covering Bombay Municipal Corporation or assembly or anything else. So it's basically I find it very is a psychological game. You know, you need to figure out who will give you in every organization, there are not only people who can just flaunt without being aware of it and giving you a story. There are people who are actually anti-establishment. Want to give you some story.


There are people who is aggrieved for certain reasons to want to give you a story. Every person has a vested interest know somebody wants to prop up the company. Somebody wants to downgrade the company.


Somebody just for the zeal, something else. So it's a psychological game, you need to get a story I was really good at, just to give you an example, a CEO of financial institution, I found it extremely difficult to get cracking. And then one fine morning, somehow, I managed an invitation for a cup of tea in his house, and there I found on the wall there was there was a big photographs of get. So I said, oh, this is it is my daughter in law and she's from us and she can't follow local language.


You have to speak to an English. And then she called to get myalgia. Name ImageWare. My Aunt Maya, this got a big cat comes, jumps on to slap and all that cat was stuck in a lift in some us some place. His son was there and he exported to India that something along. Incidentally, I'm also cat lover and dog lover, so we had a conversation and we struck a friendship like that and then news flow started.


He can empathize with me. He can find this another person who actually loves my I like me. And that's how our friendship started. And till the time that person was in office, it was just the story was a cholerae because I was a great cat lover and genuinely so. And I loved his cat and I used to frequent his house only for that matter.


So the point I'm making, it was exclusivity and how you get it, you can't be trained. It's a psychological game. You know, you need to figure out who the person and what is the switch. It's just like making love. Oh, my. I was his switch. Somebody else's switch could be different. I mean, you need to talk to his son who is in overseas and plays the son. How good is he?


And that's how these iceman's or something else you talk about, you don't talk about nicely about some politicians and you get him on this thing. You can be a little sort of not exactly sincere as long as they are not doing any harm. It's a psychological play. So the focus has been in the nineties, etc. I'm talking about is that the exclusivity?


And then two things happen, I think, as we move forward. One is this exclusivity is yes, but because of the rules, regulations, Sabeh, etc, etc. that Flaum exclusive to, much less because the person who is giving the story away could be, you know, in trouble, so on and so forth.


The exclusive, the flow will slightly dry up, not in that thing, but then so then two things happen.


One is the competition with other media, first with television channel and now with all the Internet things and all so that how fast you are, it's the fastest finger. Fast, no more exclusivity is the information, information, information, that's all. So I would like to bulk up the energy of the of the journalist now, irrespective of which platform you are on, you are on your high alert. How fast? Fastest finger, fast. Not exclusivity at all.


Exclusive. And second part that happens at the cost of this thing, exclusivity is now in terms of percentage of and I think the pie chart will be much less. But how fast do you want? And second is the interpretation, I think because news is a commodity and I can get it on my mobile on a real time basis. I really don't care much for information, but I care for interpretation. So the second part is this is the how you interpret things, you know, that's very critical.


I think the the opinion writers and commentators are much more appreciated today than they were much before. Is this because. Well, I get the information so fast, but I want to understand what does it mean? And so you need to tell the story in a different way than what it was. I think it's still unfolding. I'm not getting into a thing with media and no more an intermediary. You start taking sides and the views and news getting massaged, particularly on television channels, etc.


. I'm not getting into that segment at all. I'm just telling you, Purply in news, I think premium on exclusivity still continues, but they are not everything. One prong in the entire place.


How fast you can channel Foster's figure first because because you are competing, different models are competing and other is more than the news also the not the views, the interpretations and etc..


So these are the newer things which is still unfolding.


And of course, the other side of it is, of course, you get carried away and then you you have a view and views overtake the news. The the borderline between views and news are getting blurred. That's a different debate altogether.


All of this is really fascinating. I have a couple of quick sort of asides which will lead to a question. And the first to say there's a little bit of a trivial you spoke of exclusiveness. I remember I was a cook, a journalist in the early 2000s, and there was a legendary gentleman who was a writer for The Telegraph, the Calcutta paper. And he used to boast about how Imran Khan has given him a thousand interviews and no one else has interviewed Imran Khan more.


And then I remember one day while we were on tour, you know, going online and seeing one of his reports and there was a line in it which said, Speaking exclusively to the Telegraph, Imran Khan said no comment.


So that's I don't want to name the person, but I know what you're talking about. Yeah. Yeah.


And the other point, it also strikes me as an observation from my cricketing days, and this is something that my listeners might be interested to know also is that there was this very interesting shift that happened shortly before the time that I started writing. And part of the I, of course, used to work at Western Anglican for but I also wrote for The Guardian for the point in. And the British papers at one point in time realized that they have to change their cricket coverage because what would happen is, like you said, information became a commodity.


You know, earlier in the 60s and 70s, you might pick up the newspaper to find out what happened in the match. But by the late 90s and 2000s, you know what happened in the match? It happened on television. You might have seen it live. So the cricket report cannot give the bare facts. So therefore, a good cricket report would have some colour. It would have some perspective, like you said, some interpretation. It would be a little deep, but it would be different.


You had to do that. And like when I was looking for, we kind of covered everything. We had a bulletin, which was just information. We used to give a verdict, which was, you know, somebody stake on what happened. We had Collopy says all of that is interesting. Now, coming to the interpretive aspect of it, you know, you've mentioned that when you first got into Financial Journalism Union, I think about finance. So what you really do even now, I want to give it up.


But I think I think what would would therefore have happened is that you were asking simple questions, stupid questions, just getting the basic dope. Now, obviously, you matured in the business, you know, a little bit more than you're getting interpretive one. What kind of lenses do you then form to look at that world? And two, does it then become something at the back of your mind that if I express a view that so-and-so was the governor of the RBA, you may not like, I might lose access or I might whatever.


Is that a trade off that you have to play with?


No, absolutely not. I don't agree with that. So when I started in bank reporting, I would say mid 90s banking was a very esoteric subject. There are not too many bank reporters out there and.


I remember in Calcutta, my newspaper editor will come to interview Dr Rangarajan, who was the governor, he would fly down to the interview.


And the previous 24 hours, you know, there has to be like Bindoff silence now at his cabinet that he's preparing, he's preparing to meet governor kind of thing or not, or somebody is writing on credit policy, sitting in, you know, don't don't make sound that that was the kind of culture was there.


He just really is sort of the subject. And as a reader, I read and I don't understand also even after all these kind of things. So as I said then, things change generally things change more and more people are getting into this and that, you know, you actually start throwing stones at the glass house and you demystify things and come. And then you do things in a different way, you interpret. Now, I would say it's very important to convince the other side that you don't have any agenda like I might be going wrong.


You know, not that every interpretation is correct. And I'm accepting that I can't be the normal person. So sometimes I go wrong. I think it's not only my acceptance, but the other side also need to know that, well, this fellow does not have any agenda. He doesn't have any vested interest. But this one case, he has gone wrong. So probably I'll pick him, I'll call him and say that this happens with me. People say that when you have gone wrong, I said, yes, please.


I mean, because my teacher probably not said in most of the cases I do and not one teacher I do also multiple. I checked because to understand things better and to make it as impersonal objectives as possible. So I think if the institutions or the persons who are involved in that news, if they are pretty certain that what happened in. Yes, genuinely is a mistake I have, but I have no vested interest, so they will not shut the door for me and be certain things happen.


Is this there is something really happened. And this is not a very pleasant story for the organization, but it but I have written it and it's correct. So if you are a professional, you would not mind this.


To give an example, I know name. It's about a large bank.


Post Lehman, I wrote a story and it came on mint those days on a big and on page one, this bank had massive liquidity problem and that bank borrowed money from overseas. It's a private bank. It borrowed money from Indian bank overseas operations and at a very high interest rate. So I give a graphic ball by ball commentary I had everything on. And that. This particular bank stock was hammered, probably 20 odd percent or more. It fell down.


That entire day, the CEO had to spend on television different television channels, explaining to people that what exactly happened there was almost a run on the bank.


And Reserve Bank of India actually had issued a note also, if I remember correctly in the evening, that everything is fine with the bank. I was also interviewed on various channels and I was asked that, how bad is the scenario?


I said, no, the bank is fine. There should not be any concern about deposit money, et cetera, et cetera, et cetera. But it is an extremely negative story as far as the bank is concerned. But did I lose my contact connectivity and the relationship with the CEO? And it's.


No, definitely not. They pretty upset.


But I think a few months down the line on my event because I used to run the event. Even now with the current paper, I do the see you attended because the CEO knew that I had no vested interest, just I played a journalist job and probably had that information going into somebody else. That treatment of it probably could have been different. So I think as long as you can convince them that you are not irresponsible. If are if I am responsible and ethical.


I think they will give me a chance if I go wrong at times in this case, I did not go wrong.


So even if I'm writing stories which not exactly suits their purpose or even if I have gone wrong some time, but there's a genuine mistake, I think my daughter will not be closed as long as I follow this basic principle of ethics. And as I said, a responsibility that they'll recognize that is in good faith.


It's good to know the banking world is like that, because back when I was a kid, journalism cricket world wasn't exactly like that. If you my experience. Yeah, yeah. I'm not saying that this is the rule, but my experience is this.


No, I mean, I think it's a model for every journalist. Just try to write in good faith and to cover every angle. And I think people will appreciate that. My other question, you know, before we get to your book, relates to something that you've actually opened your book with, where you talk about how it's like Rashomon in the sense that there are these multiple points of view from different. There is this complexity. And I think you've done an amazing job sort of capturing so much of that at the end of the book.


And you obviously knew a lot more about the subject than I did before, which is next to nothing. But I still didn't exactly know where you're coming from, which is a good thing that you haven't put too much of your opinions on it. My thing is that, you know, another metaphor one can use for a complicated subject is that old proverb about different blind people describing an elephant by touching different parts. Right. And it strikes me that whenever we learn a new subject and it's certainly been the case with me, that whenever you learn a new subject, you begin from one vantage point.


Maybe you read a book on the subject or there is a received wisdom on the subject. And you begin with that natural view to start with. And of course, you're open in finding out more. But over a period of time, you'll get another view and then another view and then another view and gradually you begin to see the whole elephant, as it were. So have you felt through your career sort of your views evolving in this way and getting richer as you go along so you'll see more of the big picture?




I think one is this. I follow one basic principle is this. I can go wrong, so I'm open to ideas, I am not rigid at all, I don't have the last word on anything and this is because of my handicap. I don't have that. I just let the background off of the academic background or understanding theory, et cetera, etc..


So one basic principle is this. I don't know everything I can go wrong. I'm flexible in my approach.


And second is, of course, of course, as we grow intellectually, professionally, biologically, as we know more people, more doors get open. So you are interacting with more people and that's how it happens. You know, and I there as I said, I don't read too many books, but I continuously am in touch with people.


And I find that if I can spend a meaningful time, half an hour, one hour with an important person and get to know things, this is far better than reading two books on that particular subject.


You know, provided you have an honest conversation, the person is not taking you for a night. I think that's that's the case. It's it's a really nothing is absolute, right? No, it's a very layered truth is very layered even in financial sector. I know. Yes. Interest rates going up, going down or that's a separate story altogether.


What's happening in the bond prices and all.


But if you see the overall scenario, it's pretty complex. It's pretty layered. And how you look at it, different constituents look at it differently. If you are a banker, you are looking at a different customer. You are looking in a different way. If you are a government, which is the owner of the banking by a large part of the banking system, looks at a different way. If you are an investor, as took a look at differently now, that most bank, which is the investors are very happy, the customer's not necessarily very happy.


So there are ways of looking things.


And so we need to I think as a journalist, what I believe is this to reach out to as many people as possible and the different constituencies, not different constituents of people to get a 360 degree angle of what's happening. So you have to have a long shot. And at the same time, you need to also have a granular details to write the story. So fly on the wall.


I think the challenge is how do you combine the two? You know, one is this you have to have a solid grip over the entire thing, you know, what is happening. And they are multilayered perspectives and other is that granular details as if we are present there. So in all my books, I try to whenever things come, I try to be that not so that's where I think it's all, again, the same.


I think I'm repeating myself. It's a part of the storytelling. How do you approach things?


Wonderful. Let's take a quick commercial break now. And at the end of it, after the commercial break, we'll come back to talking about Pandamonium. OK, thank you.


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Welcome back to the scene in The Unseen. I'm chatting with the man about his wonderful book, Pandamonium.


Let's talk about this book now, because your previous books are only about one subject. So, you know, whether it's the Lehman Brothers crisis, what happened after that or HDFC or Sahota, they're all about one subject. But here you've not only taken a really broad canvas, but what I found fascinating was you've taken different approaches to the storytelling where there's a lot of analysis, there's a lot of straight up storytelling. There are those interviews with the four former governors of the RBI and there's a chapter with charts where you're kind of making those charts speak for themselves and be so revelatory.


So was this a conscious decision because you felt a. There was so much content that you couldn't contain it with one approach, you had to do all of these things. I know, because, as I said, there is no straight answer to the crisis. What led to the crisis, if you allow me? Actually, what led to the writing of the book also then you I can I'll be able to explain to you better.


It's in October, I think, 15th October, our finance minister misadministration attended in the U.S. In one of the meeting, you know, there was a moderated discussion. Arvind Panagariya was moderator and she explained India's dream of becoming a five trillion economy. And then there are some question on cessations. One of the gentlemen were present there, asked a question referring to a speech of Raghuram Rajan as saying that Dr Rajan feel that too centralized regime, the power structure in India is responsible for economy not being able to attend its potential growth.


No, madam. Do you agree with that? And she was, I think, quite taken aback with this question, she said, can you repeat again? And the gentleman repeated the question and then she took a long answer. Essentially, she said that I have respect for the tragedy. You are referring to Dr. Rajan's comment. But do you know that during Dr. Rajan's time, which Dr. Rajan and Dr Manmohan Singh for the public to the banking industry, that was the worst time in India, etc, etc.


, and somebody was present on a real time call me in India, that you have been following this industry for quite some time. Do you agree with that assessment that it's Rajan and Manmohan Singh, that the villains of the piece and that set the ball rolling, that I said that question can actually lead to a book? And really publisher Kapil also had an idea of getting the big picture of that.


So that was the origin. And because there is no straight answer.


There are multiple answers. How did we get into the mess?


Is it the 90s, the date of development, financial institutions and conversion of that banking our banks into universal banks? And they started giving project loans also, which they are not very comfortable. They only knew are even now they know only working capital loans giving.


So is it the reason for this that countries are dealing, Doctor, that this regime between 2006 and eight, the three years when India, the economy was growing nine percent plus credit growth was more than three times or three times of the GDP growth, inflation was low. So those are the years of irrational exuberance. Did that sow the seeds of the problem or is it during Suharto's regime post Lehman crisis, the ultra loose monetary policy? And he was pretty slow in unwinding.


He was taking baby steps and that's how we got the very high inflation, et cetera, et cetera.


So is it that the root of the problem is this or Dr Raghuram Rajan was the overly aggressive in cleaning up the system?


So there are multiple questions.


You know, there's no there's only not only one question, and there are various ways of looking things in different parts like bubbles in the banking industry. There's a problem. Is the private sector entirely, you know, is a gold standard? No, you have yes. Bank and then problem with ICICI Bank also, you have a problem with the rating agencies. They have not come out in the best of color during this time. You have a problem with the nonbanking financial system and then you have the Reserve Bank of India as a war against NPA and then RBI is inspection and supervision.


Also, I there are many questions unanswered why they took so long to discover what's happening in his bank.


So there are multiple questions and there the truth has many layers. So obviously I needed to take a look through different lenses, but as I said, I wanted to combine the micro and macro.


I wanted to give you a 360 degree point of view as well as a fly on the wall kind of thing. I was present there. So that's the approach. And in additionally, I thought there'll be a value addition. The governors who actually post economic liberalisation, we had this governors. What do they say? I approached everybody. Not everybody responded positively, but those who responded, Rajan, Reddy, Rangarajan and Subbarao. This itself can be a book.


What is their take on the problem and how have they come? And there I have asked them, I would say brutal questions like, are you responsible for this? And the answer, whatever it is. And then your charts you spoke about, I thought it's a one point five lack one like 50000 books. So if you don't have time, probably you can only read the charts some sixteen not charts, which tells the story. So that's that's the structure of the book.


So you've mentioned a number of layers. And I'm going to ask you about each of those layers one by one, because they're also fascinating and I'll ask you to demystify it. But first of all, you know, you mentioned that what the Malaysian government said about Dr. Rajan and Manmohan Singh and I love the fact that during your interview with him, you actually asked him this. But what's your response? And I'll quickly quote what Dr Rajan said in response to this, where he said, quote, I do not want to get into the politics of it.


She has to see what she has to say. What I will say is that I repeatedly told the government that if we do not clean it up quickly, you cannot blame the problem on the previous government. It will be your problem. I think now it is the government's problem. Stop. Good. And these are very wise words. And because, you know, now we are in 2021, this government has been there since 2014. And it is, of course, true that many.


All of these problems began before this government came to power, like I did an episode with the journalist Bujumbura, who's written the book The Lost Decade. And there's a lot of sort of description there of how so many of these problems, including especially the new problem happened in the previous regime, much of which you have also kind of described through your sort of narrative, which is so kind of fascinating. And what I loved about these interviews of all four is that you were asking them brutally honest questions and they're giving you brutally honest answers, you know, like the Sábado, for example, admitting that your mistakes were made.


But you can see that in hindsight, in the moment we did what was right and, you know, all of them being so kind of open about it. Do you feel that many of these bankers, even if they are like appointed by different political parties at different times, even if they're carrying out policies opposed to what the previous guy might have done, do they kind of see themselves as part of a community of bankers who are, after all, working for the, you know, the good of the nation and the good of the industry?


So there I would call in those areas kind of thing. It's basically said we have a large government owned industry, which is stock will be about 65 percent. That's the Citibank. The numbers have gone down, but their market share have not. I mean, it's going down slowly. That's a separate story altogether. But they are basically a sort of worriers and it's a government that calls the shots.


So I don't think they have any political affiliations. So they have their own ideology.


It's sort nothing. It's whatever they've been asked to do. They do this and irrespective of which government is in power.


Now, the larger issue is this as a doctor babydaddy, as mentioned in an interview, also, it's not the ownership, but how the owner behaves.


It's a socio political instrument.


Banking in India, the state owned banking system is a sociopolitical instrument. You know, in the 80s, there's a Tata Steel and we also make steel. I think the bankers can say we also do banking because beyond banking, there are so many other things they need to do.


You will find that such a majority, the branch manager is on a broom on there on the pavement near their branches to cleaning up the things so that there are so many things.


It's basically it's a it's a socio-political instrument and their banking system. So you need to decide that whether they will continue to do or you treat them like the business units, you can't have the best of both worlds that they will do financial inclusion. They will go for Masumi lending this time, which is government guaranteed that three trillion trillion rupees during that whole big time.


But otherwise they are always under pressure to to go certain segments, whether it is SSME, SME or infrastructure lending in certain areas, they do not have the expertise, etc etc. so that the government pressure and this is irrespective of which government is in power.


I'm not talking about the phone banking, which this government has been talking about it, that basically calling them up and telling them this industrialist, you give loan on that industrialists. I'm not talking about that.


I'm talking about irrespective of which government is power, it is the greater good of the nation and the society and the downtrodden people, the so-called bottom of the pyramid.


They have been using that banking system and the bankers, the CEOs and employees of those banks, I don't think they have any ideology. They don't have any political affiliation. They are just the areas of the government, whatever they have been asked to, they have been doing it. Now you can have this. And plus also they will be a great entities as a business entities. You can have put that, you know, so you have to take a call.


And I'm glad that this budget has spoken about privatization to start with two banks. I think they should go for more. Probably a few large banks can remain as a sort of insurance against market failure and to do the government things like MACV financing, financial inclusion and so on and so forth, but let others go and run as a business enterprises. And, you know, that brings me to this larger question that is often struck me, that when you bring these two together at one level, a bank is a bank.


And you might say that we don't only do banking with banking is normal, finance runs the entire economy. It's you know, that's normal enough by itself. You don't need to do more than that. But when you add these social objectives and that, do the incentives go in the opposite direction? For example, you know, I haven't read your book on Lehman Brothers, but one of the things, one of the perverse incentives that played a very small part in the 2008 crisis happening was, of course, when the US passed the Community Reinvestment Act of the late 1970s, where they mandated that, you know, housing loans have to be given to people who would otherwise not qualify as creditworthy.


And many of those added to, you know, those perverse incentives and added to what later became, you know, a bad loans problem. So is that a similar thing? I mean, how does one balance all this? Right. On one hand, you say that, OK, this public sector banks are not just banking. There are all these social objectives that they have to fulfill, which might be noble objectives. But maybe there are other ways of doing that.


But you mandate they do that. And plus you have all the other incentives you have is that no one is really accountable within the governmental system. Right. You are not like in a private sector bank. There is always the pressure of the market. If you have too many bad loans, the market will punish you in a public sector bank market would punish you. Instead, the government will recapitalize you with, you know, yours and my money, taxpayers money.


So what do you feel about this sort of interplay of incentives that happens so.


Absolutely. Absolutely. I mean, what happened is this like Modra alone, OK, you force the banks to give the loan. Now, it's an abnormal time. The big time things have gone different, but. Even Pleco, I'm talking about, you need to find out how the model on living, I have heard RBA deputy governor from public forum saying that Magellan is that are too much of it has been green. So once you force the bankers to get into certain areas, as I say, it's a social objective, socio political objective.


Now, then you don't expect them to run like a business enterprises. So Magellan is a classic example of submission credit card. You ask you ask any bankers, it's perpetually you know, it's always replenishment. The loans are never paid back. It's always the fresh loan and ever greening. It's happening often. And I can tell you this to cash on credit card and Magellan. So what is happening, as you rightly said, that the social objective, you know, 51 years back in 1969, back nationalization happened in two stages.


First stage was 1969. And then, you know, you ask any bankers, they take enormous pride that we have built the nations, we have built bridges, we have built all roads. We have built everything. We have taken banking to the hinterland. Financial inclusion. Yes, they have all done this. But do we live in this nostalgia and continue with that? Or is it the time that you recognize that this thing cannot go? It has to be either or either.


They continue to be in a situation where they will cater to our socio economic need, but then we let's not expect a dividend from them. Let's not expect them to run like a commercial organisations or you do this, don't do that at all and let them get get the govt up new.


But that should be a commercial organisations which cannot be done unless they are privatised. Because, as I said, what you've got already said that it's not the ownership, but how the owner behaves. You also say they follow a rule of Hindoo undivided family. It's between RBI, the regulator and the Banking Division of Finance Ministry and the banks. There is a very loose accounting policy system and nobody actually cares. There is no there is no accountability as such.


So there are two extremes and the media should be, which probably the government is trying to follow now.


Part of them, partly you privatize them, let them be more efficient as a business enterprise, and let there be certain entities still majority owned by the government to do this work. Because if that's the case, the other side also, you know, the banks are not accountable.


These are all very target oriented. No, it's not targeted is not quality, but quantity. This much loan you have to given it's not you will not find in that target the quality of assets, the how expensive the assets would be.


Have you ever heard any banker being losing job because that was is inefficient? No.


On governance issues, there have been cases where somebody else, somebody at times have been asked to step down. But on a case of inefficiency, no, I look at the way they are being paid. It doesn't justify at all. I mean, look at their counterparts in the private sector that the difference the in the kind of people between the public sector, bank CEOs and the private bank CEOs.


So in every way, you know, you actually their hands are tied from behind and then you can't expect them to do a wonderful job.


You can't have the best of both worlds. So I think this is the time now to take a call. And I'm happy to see that the budget has done it.


Yeah, I mean, one of the one of the interesting sort of nuggets in your book was that, you know, the reason public sector bankers get paid so little compared to private sector counterparts is because the bureaucrats don't want them to get paid more than them. Yes, it's capped capped at the bureaucrats that it's got to the bureaucrat salary. And you mentioned bank nationalization. I came across this delightful nugget, which I'm going to read out in your book about that, which reminded me of another prime minister and referring to how Indira Gandhi took the decision.


You've written, quote, Neither IJI Patel then the economics of the secretary nor Elkader, then RBA governor, was taken into confidence even more. R.G. They say then deputy prime minister holding the charge of the finance ministry was kept in the dark stop quote. And I read this and I immediately thought of Narendra Modi and Demonetization, but I won't put you on the spot and ask you to comment on that. And again, about targets. You know, one of the quotes that struck me in which I highlighted about public sector banking was when you've written good, public sector banking is all about targets.


These targets are first set by the government and reinforced at different levels in the bank's hierarchy. The quality of lending and recovery is not as important as achieving the loan target stop quote, which you just elaborated upon.


Let's not sort of talk about the I just call them Complan. Boy, you know, those that don't know is that it's all about how tall you become mean. You know, they're all they're all Complan boys by the. Is all about being Complan boys and girls so that you are your doll, your balance sheet is large, but not inherently, are you strong? No, no offense on complainers such as Knowsley, I'm saying that this is what it's all about, the height it's in compliance is all over the height.


I'm a boy. I'm a girl. Here is all about how big is your balance sheet?


No, I'm getting full of nostalgia because you're bringing up these 80s commercials earlier that was inspired to be humble. Not they had no complaint, girl. And I'm waiting for you to mention now you've become a Bournvita mom. Which one was it? So let's now get to sort of I found the first chapter of your book absolutely incredible. It's called, Like For the listeners, the title is Who Killed Indian Banking? And one by one, you are examining all these different layers, like you said.


And I'd like you to sort of go through those different layers with me as well. And one interesting point you make early on is that about DFI is development financial institutions and how, you know, shutting them down in the 90s was something that kind of changed the environment. Tell me a little bit about these DFAC and the role they played and why the transition could have played a part in the crisis today.


No, it's basically, you know, we had this upsy IDBI and ICICI and there are a few others is basically the project financing. So you have banks which are into working capital loans and you have DEFFEYES, which are into project financing.


And the DFI is where actually they used to get sort of subsidies from government in the form of long term money at a concessional rate. But post liberalisation, it was decided that they would not get this anymore.


And if they would not get it, then where did the money come from? That's the problem. And then they got into the problem of asset liability mismatches, which ICICI and IDBI was forced to convert themselves into bank. Now they got merged with the with the bank themselves.


So essentially we embraced we pull down the dividing wall between deifies and banks and we made the banks, the so-called universal bank, which will take care of everything. But unfortunately, our bankers have been trained for working capital loans. They have not been trained for project loans. We could project loans. Of course, you need long term money and then the risk management, etc is is pretty different.


And of course, along with the DFI is had there been the bond market then, I mean, the really vibrant bond market, that would have been a different story. But this has not happened. So ICICI had to get itself with ICICI Bank. It happened if I discussed about how Mr. CaBi comment made the presentations to Reserve Bank of India and explain that how that what kind of how many slides were the presentation? I spoke about that and essentially the asset liability mismatches and they could not survive.


It had to be done. And similarly, it happened with IDBI later. And now it's very interesting that you asked me now as we speak, this budget is talking about DFI, that the government the budget is talking about the DFI will come up and actually give some five trillion, five.


Blackbaud What? Oblon in the next three years or so, that's the plan. But the key question is, where will the money come from? Government can give the capital, but the money come from in 90s, we had to close down the DFI is because they shut the taps for the government. Long term, low cost money was closed. Now, are we going to open that up again, you know, reversing that decision of 90s after 20 years or.


But where did the money come from because of fiscal deficits? So there are many questions to be answered or what will be the moral of this if we do not know? But the fact remains is this.


The DFI had to go. The banks have not learned the way to lend project financing, both in terms of risk appraisal and monitoring. And that's what one of the reasons we are in a mess.


So if I might ask what might be a stupid question, it's been 30 years.


Why haven't we learned that's that? I think bankers, the you know, the book also dealt with one of the key reasons which are related, like the state Bank of India had a Muchin banking queen called SBI Caps. Now, SBI caps have been primarily working as a appraisal of the all the project financing. Now there's a clear conflict of interest.


And I mentioned about that the Reserve Bank of India sometime back had said that, that the investment banking arm of the country's largest lender appraised the projects and then it recommence.


And then it also Hoxha the projects to other banks. Now, the SBA is big balance sheet and the ability to take risk is very different from much smaller banks where their balance sheets are much smaller and their ability to take a risk.


But because SBA is doing this and SBA Caps has a president is because hocking it, the others will come on board because nobody wants to, as I say, just a target.


Complan, why syndrome?


If somebody is giving money, I also need to be there and I'm sure there'll be pressure from the ministry and all. You need to get into infrastructure to give money because you have political meeting with the ministry. And there you have been asked that what is your how much loan you have given to infrastructure sector, so on and so forth.


So I think it's a combination of multiple things.


So they are so there is no individual project appraisal in accordance with your balance sheet and risk appetite.


It is because the country's largest bank is going there because it is appraised by the investment banking arm of the largest bank.


It's good. And everybody else, irrespective of your risk appetite, your balance sheet strength, what you can do, you go there is the sort of herd mentality and then you pay a price because somebody will be able to take the knock because of the balance sheet strength. But many of the when the loan goes bad, but many of you will not be able to take the heat. I'll come to SBA.


Absolutely, because that's also incredibly fascinating. One of the things you also mentioned is that one, banks did not sort of develop the skill for this kind of project financing. And some of that might have to do with incentives, like you pointed out, and the way they all played out. But you also pointed out that a deep corporate bond market might have made a difference, but there was no such market. Tell me a bit about how, you know, the shallowness of this market.


And I'm struck by one sentence in particular. Read about these bonds. At one point you write, Good holidays also lead to inconvenience. If the redemption falls on a holiday, the issuer is required to pay up on the last working day before the holiday. But different states have different sets of holidays. Yes, yeah.


You know, these are all little technical things. But yes, these are all because, you know, you have a market holiday at different different states are different. Like a modest of the US will be probably a holiday here. Netjes was both will be holidays is Bingol. So if you are to subscribe to that particular bond and if you're in the days that, then you are in convenience.


So there are there are multiple issues we have been talking about for decades now on creation of a corporate bond market.


But it does not happen for multiple issues. You know, tax is one angle, then this is some silly holidays, another angle, and there are many more things than all.


But the key issue is this.


One of the reasons why our bankers could get away by hiding is because we don't have a corporate bond market now in a developed market, you know, like us or others, if you have a vibrant corporate bond market and if you are a defaulter, then you can hide yourself. No, today's the redemption. You have not been able to do this, so you are exposed. But in a bank loan, if you are a banker and I am a borrower, we can work out some kind of deal between you and me, which will be basically the so-called ever greening, etc, etc.


your balance sheet management, because you have a vested interest. The moment you set Tomalis a default and then you have to provide for it, your position will eat your capital. And you also tell the world your investors will not be happy because Ahmed Inbee has gone up. So it SOB's you also to help me out the kind of nexus walks out between you and me. Which cannot happen in the corporate bond market, corporate bond market. I mean, you have close to my bond and I'm not being able to pay you the money back on that redemption debt.


You have no choice but to announce that Kamahl has become a default. So which is why it was much more difficult in India to wage a war against India. Because the banking infrastructure gives you a smokescreen to hide yourself, but it's a fantastic point, and just to demystify for my listeners what these sort of bonds are and why the lack of a secondary market is a problem.


I'll quickly quote from the book itself that amalgamates Good bonds are secured instruments which allow funds to be raised for the long term or even forever. In the case of perpetual bonds, if a bond holder wishes to exit, she can sell the instrument in the secondary market. Hence a bank which uses short term financing or a mutual fund facing redemption demands can also pick up long term duration bonds without fear of asset liability mismatch. This, of course, depends on a liquid secondary bond market where instruments are easily traded.


This is a case in most developed markets, including the U.S. stock. And like you correctly say that when you don't have that kind of a market flourishing, you also therefore have less information. And the market can't really punish you because there's nothing that it's looking at. There's nothing, you know. So I kind of get that another sort of factor. And I'll come back to the banks and the Evergreen's and all those incentives later. I'm just going by the order of LEOs that you examined in your chapter.


Another layer that you mention is sort of the flood of what we call the flood of money, where you talk about how our response to the 2008 crisis, Mr Sabato's response was to just lower interest rates and flood of easy money flooding in. And some people have made the point that initially it might have been advising to do, but he should have stopped. But just for a couple of years, it kept continuing. So tell me about how this could have been a contributing factor in the bad loans crisis that took place later?


Well, what I'm saying is one of the assumptions I don't have the last word on that.


It's one of the multiple factors. One factor is this.


When Lehman happened, you know, this Subbarao parachuted into as a central bank governor just about a week before the Lehman crisis really stepped down, I think eight September and in September. I don't remember exactly just about roughly a week before and 14 September in their time night, Lehman collapse happened. So but I was the first. Finance secretary in office transported to RBA. There have been indications from finance minister, but they have gone through some other assignment then coming here.


But here is and then Lehman collapse. And one way of preventing this kind of scenario, like in Corbitt time also, we have seen that when markets become extremely risk averse, interest rate hits the roof. You flood the system with money, you encourage people to borrow.


One is this you break the risky business of financial intermediaries. You flood the system with money and you encourage consumers to borrow so that borrow and spend so that quickly the you can get back to the normal economic growth, etc..


It did happen, which is why even we don't see many of us say that it was not a global financial crisis, was only a transatlantic crisis because its impact was limited to India, did not have that. Lakshman is one of the persons deputy governor. He firmly believes that it was nothing to do with Glaube Tsouli transatlantic crisis us but it as a global economic crisis. But look at India. We are not affected only two quarters. I think our economic growth came down below five percent.


We came back to Subadult, brought down the rate to historic low. Seerat also came down very low.


He flooded the system with money, but then when the normalcy was returning, he was slow in unwinding. And there is a classic conflict always happens between the government and the Reserve Bank of India because any government, irrespective of its colour, is there for five years.


It can go beyond that.


But typically it's a five year horizon and government feels that the growth can only happen if you have a loose monetary policy, which is money in the system, a lot of money in the system and low interest rates.


So people will borrow and people will spend. But the Reserve Bank of India feels that because it has a long term view as an institution, it does not feel in five years horizon. It does not see that. It feels that no, if you have it sustainable low inflation, that can only ensure a long term growth. So there is always a conflict and it depends on how a governor handles it now.


So Subbarao was under pressure from then administration not to rewind, and he started what people say, taking baby steps while cutting the rate by one percentage point, one and a half percentage point two percentage points, while hiking rates 25 basis points.


So that showed the seeds of inflation. And that also by the time all those people who wanted to have money, they have got their money, too much of money they have got, etc. which also happened during Dr Redividing also.


And by the time Subbarao realised and it started, you know, asserting himself. And then there is a clear conflict between ministry and him. And if you remember his last policy, 2013 before going, there is tremendous pressure from the Finance Ministry. Mr Chidambaram was the finance was at that time to cut the rates, but he stuck to his guns. He did not cut it.


And then Finance Minister Chidambaram on record television channel and said, on the growth path, I have to walk alone. RBI is not giving me a shoulder. And so but I responded to this in his book in his inimitable way, incidentally, now soon in current context will have the same scenario Mr Hartigan does the current governor. He has flooded the system with money and with a serious cut and many other things. And he had brought the interest rate to historic low last year lower than what Subbarao did.


And now, as the growth picks up, he will have to figure out how to unwind. He has already started like the siren reinstating in two stages. But Market was not happy. And in addition to what the was problem here, he has missed, a current government has a bigger problem because a Corbett is a much bigger issue and fiscal deficit much higher. Now, government borrowing is much, much higher. So he has also the challenge of him.


He has done a remarkable job to tackle covid and keep the financial sector stability and being the economy to a growth path.


But now, as the time unwinding comes, which is already knocking at the door because we are talking about ten point five percent growth next year, he has to unwind.


It cannot be always this kind of liquidity sugar rush and low rates so that the what Subbarao faced during his regime, I'm afraid the current governor also will face now.


And that will be the litmus test of him, how to unwind that. That's really fascinating, the political aspect of it. I'll take this moment to point my listeners to an earlier episode I did with Pooja Mehrotra, this great book called The Great Lost Decade as well. Were her narrative, if I'm remembering it correctly, was essentially that, you know, Chidambaram and Subbarao together, Chidambaram was finance minister at the time, you know, lowered the rates as they had to at that point in time.


They felt it was wise. But then the terrorist attacks in Bombay happened and Chidambaram was shifted to the home ministry because the then home minister, I think it was Shivraj party, wasn't doing a great job. And Pranab Mukherjee got put in the finance ministry and Pranab was putting sort of immense pressure to keep the interest rates low and to keep the easy money going, which would, of course, be in the interest of politicians to do always, because, you know, you can give an appearance of growth that we know.


Would I be correct in just to again demystify why this is a problem? What low interest rates effectively do is they just they increase the money supply. There's more money in the system. Some of it, of course, can reflect an everyday inflation for people. But what also happens is that banks, financial institutions and all of that have more money to lend, more money to play around with, and therefore they start giving more loans. And this can also playing with the politics, like earlier you referred to phone banking and and allegations where even at that time that the finance ministry and the Mukherjee was, you know, running off on a loan scheme, which is like almost self-explanatory.


So I was also struck by again, I'd like to point my listeners to the interviews at the end of your book, because Dr Rangarajan there says that India overreacted with those low interest rates and that he warned against it from the Rajya Sabha that he was at the time. And similarly, Dr Sábado indicates that, you know, in hindsight, you can see it was a mistake and it was. But at the time, what you do, these are the circumstances.


Is that sort of an accurate summation of everything that's going on?


No. One is this, as I said, Subbarao himself. And in hindsight, we said that the ultra loose monetary policy. Well, probably not exactly warranted or had it been warranted or it could have unwinding would have been faster, baby steps did some damage.


And right now what you are seeing, if there is too much of money, we run the risk of being of inflation and misallocation of credit. On the first part, I do agree. Yes, it will be inflationary. Too much of money is a in economics. We don't need to get into the theory. But on the other side, I have no I don't think so because I think bankers have learnt a lot.


You know, after this, the entire RBA is fighting in the NBA and the massive clean up what happened and all.


So bankers have gone to the other extreme. They're becoming very discovers. And if you ask anybody in the past one year or so, even during the Kobe time, Reserve Bank of India and finance minister is actually making this allegation that bankers are risk averse. And if you ask the bankers, they will say in private, they will say, look, when we were giving loans and you found that we are pretty liberal in giving loans and we want our fingers, we have found that things were not exactly did happen the way we wanted.


We accumulated bad assets. You blamed us. And they not only blame some of them were sent to jail and then all the investigative agencies were very active. And it's pretty unfair in many cases. And now when we are using our discretion, I want to check who is worthy to be given loan and who is not. You are telling me I am risk averse.


So what is so I don't exactly agree with what you are apprehensions? Probably no, because the backdrop is very different than what happened in 2000 post Lehman crisis. There is no RBI in war against India. There was no activism by the investigative agencies. Bankers are not thrown into the jail and so on and so forth.


But. Between 2006 and 2008, in three, four years, bankers had a torrid time. I think they have learnt a lesson. They will sit on the cash.


They will keep keep the money with the Reserve Bank of India's reverse repo window and on in technically what we call negative carry less than what they are paying to depositors, but they will not be easily carried away by the floor and start giving money left, right and center, which they have done in the past. They have learned their lessons.


In fact, you refer to this in your book as Fear, Psychosis and a lovely phrase, and I'll come to that as well. No, what I meant was no, not with reference to the present time, but in general, the point is, this is this is what happened then because there was so much money in the system. Yes. It was just a lot of lending that went on. Let's also talk about one thing that I want to ask you to elaborate upon too much.


I'll ask my listeners to just read your book. And that is you've spoken about how what you what you describe as infrastructure blues setting, where they were land acquisition issues of a power project, issues, telecom issues. Things were either stuck because of policy paralysis, which you've also written about, that, you know, bureaucrats would be hesitant to sign on anything because, you know, allegations of corruption were huge. So no one wants to take a risk.


They just want to really play it safe. And in all of these sectors, there were massive problems. And what happened because of all of these problems, therefore, was that, you know, all these infrastructure companies are taking these loans, but now the project isn't happening. So what do they do? And yet, you know, they kept finding a way out due to, you know, various sort of clicks, like ever greening and, you know, restructuring and other euphemisms which came in.


Tell me a bit about how all of that kind of started to then take place.


Now, it's essentially, you know, this is, as I said there and I'm very impressed the way you have read the book. You know, it's every every bit I think I've read. So this is one of the contributing factors. And as I said, bankers also have an interest because if if I'm a banker and if I the moment I identify one known as bad loan, then I need to provide for it. It eats into my capital.


I'm not really sure what the government will give that capital to me. So it also helps me by camouflaging by everything. That's what they have done. And apart from anything else, the contributing factor is the policy paralysis that you have said, which is in the second UPL during the second part of UPA between 2009 and 14, things were just not moving. And there are problems with in my ministry, there are problems with the legal issues and projects are not picking up.


So if borrowers have taken money and then is not getting the right kind of clearances, then the project will not take off. So what do you do on that? So that's the kind of thing.


So then you have I don't want to get into all the technicalities and in your audience, as you rightly said, wanted to read it. But how even this project Commencement did plays here in this case plays a very critical role and how they are restructuring the loans and changing the project commencement date just to keep the loan alive. So if you if you look at the entire bank's books, they are all restructured loan and are in position, hiding within stack of restructuring loan.


It's only after Reserve Bank of India start fighting it out and forcing the banks to come clean. Then you look at the two charts, the restructured loan chart and the NBA chart will be very close to that is structured a loan shark and a sucker loan is NPA plus other restructured. So till about 2015 16, before the NBA started its work, that is structure loansharks will be very long and the NBA charter, which will be next to it, will be very shocked because they were not accepting it is my NBA.


It's only the structure. But when RBI forced them, the NBA starts going up and the gap between the restructured loan and the NBA started not closing up.


Fascinating. And I we're going to break this up, this problem of bad loans from the bank's point of view into two parts. One is how are they giving those bad loans? And two is, one, they that these loans are shady. What are they doing to kind of what kind of different kinds of jugada they're doing to kind of keep them going and not declare them as NPA? Now, when it comes to the first part, when it's sort of the giving of loans, at one point you write got seduced by the lure of credit growth.


They fail to do due diligence and accept reject appraisals done externally at face value. And then when they ran into trouble, they also tried to cover it up, etc., etc.. And you also point out that these appraisals are, you know, a sham because like you say, quote, appraisals carried out by professional merchant bankers with conflict of interest as they were hired by borrowers, unquote. This sounds to me exactly like the credit rating agencies in the US before the financial crisis were that they are paid by sort of the borrower.


So obviously they'll give good ratings. The incentives are just completely messed up. And you referred earlier in this episode to SBA Caps. Also tell me a little bit of SBA caps and how the, you know, the perverse role that they played in this.


No, it's actually just pulled up by Reserve Bank of India recently, sometime back SBI cap, as I said, its investment banking arm. But there's a conflict of interest is hired by the borrowers. And then, of course, it in turns hires different agencies in their respective field, whatever the best one.


But ultimately, the buck stops there. It's the onus is on these big gaps and then it does not stop here. It then hox the. So first, it's the role of the project appraisal, which is, of course, it outsourced from various entities and then it becomes the project syndicate.


So then what happens is that it sells the loan to others as well. And then how does it sell? Because SBI is the lead lender, others get carried away and everybody wants to be there.


Citibank is all about Target. As I said, Target is not about how impeccable is your asset quality. What is your return on assets? What is your return on equity? These are not the targets. Targets are. What is your loan book? What is the deposit book? How much money you are given to the SME sector, how much money are given to the private sector, how much money you are given to the infrastructure, so on and so forth.


So when you are, when you are under the pressure to meet the targets, so you become yourself an easy target, easy prey for this and that's how it happened. So there is nothing called project appraisal because the appraisal is, you know, done by an agency. Only the top sheet gets changed. You put your stamp and put your bank's logo, et cetera, et cetera. It becomes your appraisal and that's how it happens. That's what exactly has happened.


And when it goes, as I said, then it can go back for multiple reasons. Every promoter is not exactly ethical.


What Dr. Rajan found out that many of the Indian promoters actually don't bring in their own equity. So any project has two parts, equity and debt. And depending on the profile of the project, the data issue depends. But there have been many cases. The promoters don't get that equity. They use the debt as equity and also debt.


So there would be definitely compromise promoters who don't want to just take in your money and don't want to pay back. And there will be external circumstances like the what happened during this update to the entire policy paralysis. So it was a very complex scenario, multiple contributing factors. And then the banks were insured up telling the world, look, we made a mess of it and it's in a bad shape because as I said, because of the fiscal deficit, the government cannot be liberal in recapitalizing.


And once you bear everything, then your investors also will not be happy. So you keep on ever greening, find ways how not to tell the world how bad is the situation till Raghuram Rajan took the ultimate step to expose it?


You know, we'll come to that. And just sort of this passage in Evergreen English, I think is a very sort of a lovely portrayal of how it happened. So I'll just read it out for the benefit of my listeners, where you write, quote, When a project got delayed, the banks approached an investment banker like SBI Caps to create some room for fresh loans. This could be done through various creative means. In some cases, a project was created or the original project was expanded or the product line was added.


The company setting up the project could. For example, by so-called line balancing equipment to make it more viable and efficient, let us see, the new facility may need 300 crore. The cost can be padded up with things like building improvement, retrofitting of equipment repairs and other miscellaneous expenses, which are difficult to quantify making, let's say, 500 crore. Such practices were rampant in the power industry. In sectors, lenders sanctioned additional loans based on the investment bankers appraisal, with nominal or zero equity infusion from the promoter.


The lending banks claimed the new loans helped the company servicer interest in instalments and so prevented the entire exposure from becoming an MP stopcock. And it strikes me here that, you know, earlier we were talking about incentives and even in past episodes that I have sort of done on banking and interviews and all a long time back, we've spoken about how the incentives for businesses and private banks are different in the sense that there's much more accountability in private banks. You know, they'll put a lot more effort into appraisals and all.


But when it comes to something like Evergreen, it seems that the incentives are similar. If I may think a lot, because nobody wants to show bad loans on their books. And this is just a good way of, you know, making the books not look as bad as it were. So, you know, when this aspect comes ever greening and what you you later have a section on the creative restructuring, would you say that, you know, the incentives are perverse all the way through?


Yeah. Actually, you have raised a very interesting point. If you look at the NBA overall NBA, you will find that public sector banks have far higher NBA than private banks.


But if you look at with a look a little closely, you'll find that, no, it's not exactly correct as a group they are. But there are some banks which are almost negligible, NBA, because they don't get in there, like, for instance, HDFC Bank and go to the bank. They will not take exposure to that kind of areas. So they won't have any NPA whatsoever for that particular segment.


But if you look at ICICI and access those days, I'm talking about 2014 15, you will find they are NPA in that segment is compatible with public sector banks. So it's not only the public sector banks have gone wrong. Those private sector banks, which are betting big on the India story infrastructure, they rate the economic headwinds wrong. They also got into trouble.


And which is why this particular two banks in those days I'm talking about not now, ICICI and Access Bank also have pretty pretty high exposure to these segments, which the public sector banks have.


So it's always I mean, you have gone wrong for multiple reasons. They have gone wrong. And then you try to find out how to do this and what you read out some extent from there for the listeners, etc.. It's a classic error, grinning, that I can't give you a loan for the same project.


So we figured out how to create a sub project and give a loan.


So you are able to pay me back service that interest for the time being, you know, and then if I think aloud, I think the difference between private sector and public sector banks when it comes to giving the loan in the first place, you know, doing their due diligence and all that, is that I think the private sector bank is equally likely to make an honest mistake where they get carried away by whatever the environment of the day may be, the animal spirits or the irrational exuberance.


But if you're looking at careless mistakes or even malicious mistakes in the case of phono loan scheme, those are more likely to come from the public sector banks. But when it comes to Evergreen, for example, the incentives seem to me to be pretty much similar. What do you agree with? Yes, I would like to believe that. Yes. I mean, we can't. Yeah, yeah, I would, but only I just have little qualified that I think is a little unfair to the public sector, probably that it's basically they are always under pressure to fulfill certain targets.


You know, they are the as I said, is the socio political instrument. It's all about target. So yes, there could be some guys who are compromise. But by and large, I find that it's not exactly the recklessness or carelessness. It's just under pressure. You need to do things and you have a very short tenure. You know, you have very short tenure, unlike, say, where you have 10 years, 15 years, 20 years and end of the year, you just manage somehow your two years or three years.


You need to be not to be hauled up by either the investigative agency or by the government for not doing things, etc.. So that's how you end up being. Of course.


Now, what is happening is most of the bankers never understood that not doing things is better than doing things, which is why the so-called risk averse ness or they are not giving credit. They found that I would not be hauled off for doing any miscreant or sent to our jail if I. Don't do anything, so doing nothing is better than doing something, so they have gone to the other extreme. Yeah, and I must point out that I sounded judgmental about public sector banks earlier, but I was not being judgmental about people specifically because everyone's responding to incentives.


I was more being judgmental about structure and incentives in the way those work where you're more me. Yes. Now you've got these delightful descriptions of creative restructuring using things like EPB export performance, bank guarantees and saluki standby letters of credit and the securitization of future profit. And all of it is great fun to read. But I'm not going to make you go through those here because, you know, let the listener sort of discover those stories. But, you know, in a section called Confidence Tricks, you have this fabulous story that I can't help reading out because I just loved it.


Where you write, quote, In one such case, it was only after CBI officers entered the SBA Gap's office and corporate that SBA capsulized that it had been duped to senior employees of a public sector consulting firm, had been involved in preparing a detailed project report for a sick, large private sector steel company. But the pair had actually left the consulting firm long ago while doing the project appraisal. They were actually on the company's payroll stock, and I found this hilarious because all they did was a user, all the visiting cards when they visited.


And that was enough. Yes. Yes. So. So then these are all like the eye for detail or the granular story to make it interesting. That's what I care for while looking at the theory and doing things also. But these are all little things which actually get you feel that you don't make it more interesting and that the entire objective.


I loved another phrase you used in that same chapter where you talk about hope banking and you write code. The banks were living in hope in many troubled projects was ever greening with the banks dispersing fresh loans to book artificial profits by recovering interest on previous loans to which you've discussed. And a great example of that, which you point out is a 400 megawatt three Marshwood Hadil powered corporation, which basically was conceived in 1992. It was a project on the Narmada, but it ran against Narmada Dam project and it never took off.


But despite the fact that it didn't take off, it kept getting evergreen and evergreen and evergreen. And finally, in April 2020, the whole saga got over, which is quite remarkable new kind of story where the project doesn't exist, where the loans are just beginning. Yeah, that's that's Holbeck. Yep. That's Lietzau banking. Not your chapter about the war against NP's is kind of fascinating where, you know, Raghuram Rajan takes over at one point and obviously, you know, something has to be done.


So tell me a little bit about how the thinking within the banking community and the regulatory community evolves about these loans and what should we do about them?


No, as you know, when Raghuram Rajan came in 2013, his objective first he got into it was sort of baptism by fire because you have NPA in double digits and you have a current account deficit historically higher than what it was in 1991, which forced India to open up the economy.


So in the first two front, he's stabilized and inflation genie was bottled and current account deficit is taken care of, he organized I would arrange for a flood of foreign money to get into India, etc. And then he shifted his attention to the NBA and he figured out that bankers are not telling the truth for multiple reasons, as I said, because they are afraid that if you expose yourself, then you need to have a lot of capital to take care of your bad assets, which capital was not forthcoming and of course, how the investors approach you.


And then you figured out that the corporate India is actually taking that the so-called crony capitalism, corporate India, many of many of the companies actually taking the banking system for. Right. They are not bringing their own equity. It's actually bank debt. That's that playing around. So you need to do this. How do you do this? First RBI in statistical database where the banks were said that all logic on 50 grand plus you have to give data to us.


And that made RBI sort of aware of the fact that things are not exactly correct, that we should have gone because one particular entity is bad and one bank's book and good at another bank book. How can that be possible? So I got a sense that things are not correct. And then RBI launched the first of its kind globally, I would say asset quality review, AQR. And what is this? Basically, I am a Reserve Bank of India.


You are a bank. I don't trust you. I don't trust your auditor. I will send my team to audit and figure out how it is going.


And so the teams are created and it is real, like a Scotland Yard operation.


I gave a graphic description. It was not operated from the central bank. I mean, central office of Reserve Bank of India from the side budgeting markward, you are actually away from the public glare from the Foreign Office.


So there are teams who are formed depending on the profile of the banks, that team was formed, how senior people will be there, how many will be there. They went there and they started finding out how things were right or how things were wrong. And it was a real time sort of coverage to see what was going. And just to give an example, one Inspector Harbour inspector finds that one particular loan in a bank's book, it's still not paid on that, say, 88 or 89 days.


And on ninety days it was done back. So the particular RBA inspector checks with the CEO, says that, look, this is going to be bad.


What are we going to do? What are you going to do? It's only 48 hours or 24 hours left. And the banks, you told the person that, look, don't worry, we have seen this entity. Typically it on the last day low on the last day the money actually came. And the inspector was very happy that he is a banker who actually tells the truth and knows what exactly happened.


And the account did not turn back. But then just out of curiosity, he started digging it and found out the money came on the 90th day, this bank, but it left and it gone to another bank.


And for that bank, the 90th day was actually two days later.


So what was happening? A group of banks come together and sanction alone, but the disbursement happens on different days. So is 90th day is different from business and dear Dave, it's different from seasonality and same money. You would call it round tripping, you know, comes to the bank and makes it good online, did the lips and makes a good deal the second bank and leaves and goes to the third bank. So that's how the entire thing was, was, you know, was exposed.


And then there was a series of meetings between the bankers and RBI bankers would have a strong lobby.


And there are various other lobby groups to impress on Reserve Bank of India that this is unfair.


It cannot be done. The banking sector would collapse, but RBI was not convinced. The question was how much time would be given to the to the bankers to come up clean. And I think after a series of meetings when they were convinced that, yes, things were not correct, I mentioned GraphicLy, a team led by a governor and the deputy governors. They met and they left for Delhi, met the finance minister and convinced the finance minister that this job has to be done.


And in the very next day, the finance minister issued a release, how it's done. And of course, they convinced the finance minister also to come up with a massive two trillion plus recapitalization fund. So all these things had this almost simultaneously.


And it was decided that banks were given six quarters, which is between December 2015 and March 2017. They would they would come up clean. And if you look at the data those days, you will find that until September 2015 and that banks NPA were like two percent, three percent, four percent, etc. But during those six quarters, they hit the rupee. And ultimately we found like, say, Ayoubi Indian Overseas Bank and IDBI Bank and Ukko Bank are listed three banks.


I remember that NPA sort of to close to 30 percent. Probably 10 times bigger than. So what I really did is this first six quarters, you you start cleaning up and then RBI also force them to come up to tell the world, to tell Sabeh, etc..


If a bank's understanding of NBA and appreciation of the NBA, that is, the calculation of NBA was different from Reserve Bank of India's calculation of NBA.


So you would find that like bank is a case or access bank or even ICICI and many other banks in public sector too. They had to regularly come up until the CBA and others look. We calculated much less we under provided. Had we done the right kind of provision, then our net profit would have come down, or in some cases they would have actually ended up making losses and the NBA would have gone much higher. So that's the word against NBA.


And simultaneously, of course, in record time, the government of India put in place IBC, Pranab Mukherjee, as I think president signed off on in August 10th, August 2016, if I'm not mistaken. And by December it was up and running. So you have ABC, which is a bankruptcy court with a bankruptcy. Yes, the bankruptcy court.


And you have the entire actually you strip the banks naked. You know, that's what that's what happened, you know.


So, you know, you had mentioned in the break that you were a that you Bengali poems. And you'd also mention that maybe you would like to write a novel someday or a film script. And since you mentioned film script, you know, there are parts in your book which are so beautifully described that they should really be universities to someone like the LTTE. Business is listening. Kindly get in touch with the world hiring for the job. I want to read out one particular scene that you've described about the asset quality review team, the eikaiwa team, how they are and what they're doing at the corporate office where you write the AQR team was like a financial bomb disposal squad trying to despues explosives which could destroy the depositors' trust, the bedrock of banking.


A control room was set up on the third floor of our corporate office away from his central office and mentor to general managers were collating the real time data author general manager was consolidating them under different heads. And a fourth one was looking at the big picture on the computer screen. The chief general manager in charge of DBS was heading the control room for six months. The team hardly slept. All of them worked flat out. Even over the weekends. Every evening, the corporate team would come over to the central office to take stock of the situation over budget and coffee from the canteen.


The meetings would carry until at least 10:00 pm, but quite often there would be calls at midnight or later from senior colleagues who stay tuned in 24/7. Slowly, the big picture emerged stronger, which is incredible. And you know the little details like Bohai and Coffee from the Canteen and all of that are what give it so much life. And you also describe the weird things that are defined here. They defined it. A huge sum of money has been deployed for oil and gas exploration.


But then they just do a Google search and they find that the oil fields that are supposedly being funded has already been identified as right. So there is nothing there. Clearly a scam. Then you talk about another scam where they use the ACLC standby letters of credit and, you know, a guarantee on one bank causes another bank to lend. And the RBA finds these are being used as chain letters where you write, quote, Bank was giving money based on a guarantee by Bank B and then it was passed onto bank BNF and so on.


Stopped good. And the amount of creativity that the banks and whoever would have given the loans to is like like incredible.


And of course, in the book you've described much more of it. I've just taken these selected excerpts. But do you ever find yourself admiring the creativity and ingenuity of these guys who are just, you know, at the end of the day, this is a system they're in and they're making the most of it.


Yeah, but cracking the code also, you have to find that it is equally difficult. So I think, yeah, many find fault with the Reserve Bank of India, not exactly a great regulator. It comes to inspection and supervision, not getting into any controversy or debate. But it was not easy, I must say, because it was not in isolation is the entire system was working on it. It was. I know on the one hand, you have the crony capitalism, the crony capitalists, they are taking advantage of this.


On the other hand, the large part of the banking system was trying to really get to protect their balance sheets. So it was pretty, pretty Betsi.


Difficult. Yeah. And yet there are these teams of people doing heroic things. Now, another interesting layer that you've kind of explored is the action that then, you know, Raghuram Rajan and his successors took where you have explored the possibility that they might have gone from first Fosgate WQ in the words that you used. And, you know, there was they were contrary point of views from within the RBI itself. But let's give them more. Time, let's not try to do it in these many quarters, it won't happen so suddenly.


Tell me a little about that. And what were the sort of arguments?


What I wanted to say and I found out from my research and interaction in this book is actually based on hundreds and hundreds of interviews. I've got four governors on record, but I probably made 40 central bankers, if not more, off record and other sounds.


So there are within Reserve Bank of India, there is no unanimity on what we should be. Yes, bankers were ever greening. They are not coming out clean. Yes, there is too much of bad loan. But then how do we what is the way forward? Remember, I became leader before ABC. This happened. Now, had there been ABC before and then you move and you attack the banking system and force them to come clean. That's a separate story.


It started in 2015. ABC came in one year later. So then the discussions where I think Mr. Mundra was deputy governor in charge of this particular segment there, and he was also not exactly fond of the idea of six quarters. I think within RBA there are different versions that we need to give them more time.


And in that context only I said that it's from foster care to help get that all along, you are keeping your eyes closed. You allowed them to restructure to evergreen their balance sheets and you look the other way and they had a good time. And now suddenly you you tell them that within six quarters they have to come come up clean. Is this the right approach or should you have given them eight quarters or probably even more because ABC was not there.


ABC came later. So these are the internal debate RBI had within itself at the top echelon about finally Dr Raghuram Rajan.


I think decision driven enough is enough. Six quarter is enough. That's what it happened.


Easier said about those days. What I understand, because what I wrote is what I could write, but there are many things I could not write. But I am aware of things happened, so it's not that easy. Actually, there are heated debate, lobbying, counter lobbying, how to go about it. And there was interaction between ministry to a bank within the Reserve Bank of India. Also, there are differences of opinion, etc., etc..


So it was pretty, pretty exciting time, I would say, in a positive sense, you know, incredibly fascinating. You know, I've taken a lot of your time. So I'll sort of briefly first for the listeners, what the book contains. This is, you know, we've discussed a very, very small part of the book. There's also a chapter on the NBFC crisis with Ireland affairs and so on. It's written about rating agencies as a big section on public sector banks.


All that is wrong with them. How can we fix them? There's a fantastically entertaining section which reads like a thriller on fraud within the banking system, including colorful characters like Gokul Not Shitty, or deputy manager at BNP who is responsible for a two billion dollar fraud, you know, which is part of the whole nature of money scam. You've written in detail about Kingfisher, what happened there. You've written about gender, culture and so on. And I just direct all the listeners to go go ahead and read the book because it's so wonderfully clear explanation of this enormous crisis which is upon us and obviously from the Señores and also link my previous episodes on the subject.


You know, you've given me a lot of your time, so I won't keep you much longer, broader questions that, you know, we've seen a couple of broad sort of storylines, as it were, emerge out of this. One is that there is a system which is structurally warped. The incentives are crazy and people are exploiting that. And all these incredibly intricate scams are happening. On the other hand, you also have groups of dedicated civil servants and outside economists and all that who are working to fix a problem, whether it's ideating or whether it is the almost the CBI kind of operation that the, you know, the AQR team did.


All of that is happening. When you look at the present moment in time, you know, do you feel more hopeful or disheartened? And also going forward, you know, what do you think about the banking sector? Do you think is reforming? Do you think is reforming too slowly? Do you think that reform is, you know, not happening at all and it's a problem? What secretary of yours from this?


Well, it's actually her very leading question.


I mean, let me quickly tell you, had we been talking one year before in February 2020, you and me, this discussion. My take would have been slightly different, not slightly very different than what it is now. Now, as we are approaching the financial year end of last year, that is January, February, many of us, a person like me who tracks the system, was thinking that there is some light at the end of the tunnel.


Because, yes, there was a fight, there was a big part, clean up bad loans, but the first phase, which is the recognition of bad loans, is almost over and we are getting into the recovery phase.


What I mean is this under pressure from Reserve Bank of India and their own understanding and their own compulsion, they are coming up clean. I mean, as I said, that I'd be stripped them naked. So we thought that that phase is over now. They will start recovering their money because ABC again, insolvency call in record time, India set it up, but there are many complexities. It's not been a smooth sailing because corporate India, again, the crony capitalism, they go to the judiciary, they go to high court, the Supreme Court, they find ways what is to game the system?


I mean, you can't change them, right?


So ABC has not been working, though, as well as we thought. But it is going we are going there.


I globally, it happens. You can't overnight change things. But apart from ABC working itself. But is one part of it. The other part of it is the bankers started using ABC as a threat. So the corporate captains were actually staying away from the bankers, running away from the bankers. They were coming back to the discussion table and they were which was not the case earlier. So the bankers are advantage bankers now because you are running the risk of losing your empire.


So you're you're no more running away and escaping the bankers. You are coming and discussion table. So ABC policy may not be extremely useful, but the threat of ABC was useful.


And in the past few years, most of the banks have done a lot of provisioning. They set aside money for their bad loans. So when they start recovering the bad loans, then they will what you call technically in the money because you have already provided for. So the money comes, it adds to the balance sheet.


It adds to the profitability. So by January, February, one year before we talked first fees, bad loan recognition is over. Second phase will gain steam.


Now the recovery of bad loans and once they recover, their balance sheet will get stronger and they will come back to that credit. But credit growth. But. Aside, they have learned their lessons, bankers will not do domestic anymore, and the kind of political pressure and phone banking. I think it's it's there could be always pressure to give money to Muslims and certain segments and all but industry. There could be pressure to give money to certain industries. But I don't think there's any pressure to give money to industrialists as such.


Some maybe still use that clout in a different way. But I would say that phone banking and supply is history now. So things are pretty good. But now covid has changed the scenario again.


And we found that moratorium, which is three months from there to six months, the new found Supreme Court coming in, so on and so forth.


And while the bankers are saying that our collection efficiency has gone up to 97, 98 percent, we are pretty good. But we have seen the Reserve Bank of India said its half yearly health check. The report, the last report said that actually by September, the next year, September, the bad loan can be double. So RBI would give it the credit to RBI. It's pretty frank in its assessment that bad loans can go up.


So what is the scenario now? It's pretty opaque. I don't have the answer because I'm taking the bankers at face value.


I'm not convinced about the what the banker says. We need to wait after this. How much to what extent the bad loan will come back will continue to haunt us, or it is not as bad. And if we go by bankers says what the bankers are saying, that things are not very bad.


So if we take RBI, what RBI saying things will get worse if we believe the bankers things are not as bad as RBI is predicting. That's the bad loan front about the structural issues.


I think the bankers have learned they have gone through a hell. They will not make the same mistakes again. So they are chastised a lot for whatever pressure, etc. and other things they have gone through now. And as I said about the books, spoke about the kind of pressure from investigative agencies, et cetera, they have gone through. I think the bankers are going to the other extreme. They are becoming risk averse. They are not willing to lend, so on, so forth.


But those kind of ever greening and doing a favor to corporate India and doing things blindly, I don't think that's going to happen anymore. And the third piece of it, the entire thing can be done different way, I think, by announcing to banks to be privatized to public sector bank, by giving a sick luxury villas bank to a foreign bank. Of course, is India a subsidy to foreign banks? So this changes we are seeing from Reserve Bank of India and from the government of India.


Earlier, it was an anathema that any foreign entity will pick up a local bank. Yes, DBS India Inc subsidiary sticking.


But still, it's a foreign bank subsidiary is being allowed to take over a local bank. It's under litigation now, but hopefully it will go. It will come up. It will go to the DBS. And similarly, the government has spoken about, but it has spoken about the bank being privatised.


So I think the structural infirmities now being addressed. We have a proactive regulator and we have a government who has realized that for long we have been talking about now let's walk the talk.


So overall, if you ask me, I'm hopeful BODYING and the impact of covid who is telling the truth is RBI assessment correct or the banker's assessment correct? We need to figure out what structural issues are being addressed. Bankers have learned their lessons and I think the worst is behind us. Yeah, that's a that's a great summation. And it kind of struck me that what was going wrong was going wrong at two levels and at one level, which is a sort of a micro level, things got fixed in the sense you had greater accountability.


A lot of these lacuna, which banks and crony capitalists were able to exploit have been done away with. But to me, the more importantly, it was a broad structural layer which gives us big incentives. And like you said, there is progress on that as well with the privatization happening and all of that. So. So, yeah. So on that note of hope and by the volume you you mentioned, I think the criminal investigations into all of this.


And I should point out to my listeners that there are a few scenes in your book which are set in a jail as well. And there's a lot happening so kindly. You know, this is totally repetitious material, but I have to thank you again for being so kind and giving me so much of your time and sharing your insights.


Thank you. I mean, I'm very impressed with the way you have read the book and not too many reviewers or not too many interviews have done this kind of homework. I must thank you. Thank you so much. If you enjoyed listening to this episode, hop on over to your nearest bookstore, online or offline and pick up Pandamonium, the great Indian banking tragedy, but what about that? You can follow them all on Twitter. Atama Malvolio, I'll spell that out for you at the MLBPA and DiVittorio, you can follow me.


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