It does not happen often. Last week, both the Reserve Bank of India (RBI) and the finance ministry had to step in to quell widespread rumours of some public sector banks being closed. The trigger for such rumours was the Indian central bank’s decision to put a large public sector bank (PSB) with Rs6.
In the early 1990s when India’s banking law was amended to bring down the 100% government’s stake in its banks to 51%, there were all-round protests and the trade unions took to the streets. The so-called crony capitalism which spoils the quality of assets of government-owned banks, leading to periodic recapitalisation of such banks, also draws flak from different quarters. But none can match the mass hysteria that is being created by the Financial Resolution and Deposit Insurance Bill (FRDI), 2017.
On the first anniversary of the first case of loan default being filed at the National Company Law Tribunal, or NCLT, the Insolvency and Bankruptcy Code (IBC), which is supposed to tackle India’s Rs10 trillion of bad loans, is in the news for more than one reason. ICICI Bank Ltd, the nation’s second largest private lender by assets, had approached the NCLT against Innoventive Industries Ltd, a Pune-based steel products maker, on 7 December 2016. The case was admitted on 7 January.
The Reserve Bank of India (RBI) and the finance ministry have been jointly working on the Rs2.1 trillion recapitalisation package for public sector banks. This piece of information released at the RBI governor’s press conference after the monetary policy committee meeting on Wednesday is definitely more important than RBI’s monetary policy review.
Globally, most bank analysts and bond dealers love to play the “he loves me, he loves me not” (originally effeuiller la marguerite in French) game in the run-up to the respective central bank’s policy forming body’s meetings. The rules of the game are simple—one alternately speaks the phrases “he (or she) loves me,” and “he loves me not,” while picking one petal off a flower (usually an oxeye daisy), for each phrase. The phrase spoken on picking off the last petal supposedly represents the truth.
Rajnish Kumar, 59, is the fourth chairman of the State Bank of India (SBI), the nation’s largest lender, all of whom I have dined with for Lounge interviews in the past decade. Barring one, the others (including Kumar) have preferred to meet at the Belvedere Club at The Oberoi hotel at Nariman Point, Mumbai, simply because it is a few minutes’ drive from the bank’s headquarters on Madame Cama Road. Kumar walks in at 8.