Vijay Mallya probe unnerves bankers, mood at PSBs sombre


MUMBAI: “If after doing credit for 35 years, a policeman judges a banker’s decision saying it was based on poor lending principles it is time to switch to playing Solitaire on the computer than look at loan files,” says a banker.

The words reflect the mood of officials at staterun banks as CBI and Enforcement Directorate have started implicating bankers in the probe.

Bankers say while investigative agencies have the right to prosecute errant bankers, the current approach is more like “witch hunting” than systematic and professional investigation into corruption.

There is panic among bankers, and fear of losing retirement benefits and likely imprisonment are pushing many of them into a shell. They are reluctant to lend money, particularly to companies already heavily indebted.

“Definitely, banks will be careful in taking any decision related to revival of stressed companies because few years from now, questions may be asked why you lent them,” said a senior banks official who requested not to be named. “Even internal vigilance will become active in such times,” the person said.

Developments have prompted Reserve Bank governor Raghuram Rajan to warn of the negative impact the investigation is having. He said while penalising criminal actions, it is important to ensure “we don’t indulge in a broad fishing expedition, which then becomes a reason for banks to get worried about loans…which will hamper recovery and absolutely important investments in infrastructure that have to take place.”

Experts say the morale of bank officials is so low that interactions with major corporates would nearly come to a halt and banks would go slow even on recovering assets as they fear being accused of malfeasance if they sell assets at a discount, which could be termed a compromise.