Jotting Plus: To Nail A Lie

Now that the King of Good Times has flown the coop, what happens to the nearly Rs 10,000 crore he owes to banks? You need to have a peculiar kind of disposition to think it will ever be recovered fully.

And forget the all-round indignation shown by the now defunct Kingfisher Airlines’ (KFA) bankers — much of it is theatre; all knew what a big mess the loans were in. Not one moved to quarantine the company, Vijay Mallya, or played whistle-blower as he drove a coach-and-four over the banking system.

It’s silly of bankers to crib he “was well-connected and used his political connections”. Every other moneybag in this world answers to the same profile. The regulatory response has been one of making “politically correct” noises. That wilful defaulters will be hauled over the coals hereon.

Let’s take Financial Action Task Force’s (FATF) — an inter-governmental body set up in 1989 — definition of what it calls “Domestic Politically Exposed Persons (PEP): “Individuals who are or have been entrusted domestically with prominent public functions. For example: Heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.” The definition was part of FATF’s recommendations with reference to the `International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation (2012)’.

Now Mint Road does not have a specific category of “Domestic PEPs” in its circular on “Know-Your-Customer” norms (of 9th July 2009 or 2nd July 2012). But makes a reference to PEPs resident outside India. Let’s be charitable and assume by PEPs, the RBI meant both those within and outside India. Had banks followed this strictly, they wouldn’t be handwringing over “Mallaya’s connections”. Think about it: the gentleman is a non-resident Indian — to that extent, he would anyway fallen under Mint Road’s classification of “PEPs resident outside India”!

Here’s another idea that’s remains just that. Four years ago, RBI deputy governor Anand Sinha proposed a `Unique Customer Identification’ (UCI) tag for India Inc. in its interactions with banks. It was to stop the short-circuiting of risk-profiling guidelines to obtain credit. This was to morph into a Legal Entity Identifier (LEI) — a unique-ID associated with a single corporate entity, which assists in easy identification of the entity across financial markets to track settlement and exposure. North Block must implement this quickly; it fits into “Digital India”.

Mallya is not the first person to divert funds; he will not be the last. He’s also right when he complains of being singled out. Now this is not to say that “he is” or “is not a wilful defaulter” (in any case, that’s for the court’s to decide). Scores of firms in the infrastructure, steel, and power space are in the doldrums; even some who are into diamonds. It’s amazing — given the size of the dud-loan pile up in the banking system — that no other biggie has been put in the same class as Mallya.

Mallya’s biggest insurance are the friends he has — many owe a lot to him!