Don't Tell the Governor

by Ravi Subramanian

  In a few days’ time, Harsha Ranjan’s posting as the next Governor of Tamil Nadu was announced. Nobody noticed the connection between this and the creation of the MPC.

  Even if they did, they ignored it.

  13

  April 2015

  MUMBAI

  Vicky Malhotra had tasted success. The media just couldn’t get enough of him and his star wife. His investment in the IPL team had been a fruitful one. The Telangana Tigers were on a roll, winning match after match. It was not long before they had reached the top of the league’s points’ table.

  And it seemed like things were only looking up. At one of the success parties thrown for his team, Malhotra ran into Mehul Modi, a middle-aged, suave man who was also one of the big jewellery designers in the country. Clean-shaven, balding and with an expanding waist, Mehul Modi looked every inch the jewellery kingpin he was. He had met Vicky a few times in the past when Vicky was at Robert and Bright Llc. The designer had been gunning to buy Tiara to get a foothold in the European market, but Robert and Bright had continued to resist.

  ‘Vicky,’ the man said now, his voice booming. ‘Your move to India is certainly working out well for you.’ He shook Vicky’s hand and continued, ‘You have everything going for you. A winning team, a stunning wife and media that is hungry for you. Your timing couldn’t have been better. What do you plan to do now? Hope all this doesn’t mean that you are giving up on the jewellery business? It is in your blood, Vicky.’

  ‘Thank you, Mehul Bhai.’ Vicky acknowledged the praise with a smile. ‘As of now, I haven’t planned anything. There are lots of possible opportunities that could work out, but nothing has been decided on yet.’

  ‘Hmm… In that case, how about partnering with us and becoming our franchisee?’ Mehul Modi asked. ‘We are a well-known brand and you have the business acumen to make it work. It’s a win-win, whichever way you look at it.’

  ‘And what would it take to become a franchisee for your brand?’ Vicky asked. He had no intention of committing to anything, but already, his mind was looking at the larger picture.

  ‘Well, we usually ask for a high-street property of over 3000 sq. ft, an impressive storefront and an investment of around three crores. We will do up the store for you, but the stock has to be bought. And you will give us a royalty on sales.’

  ‘The entire stock in the store has to be bought by me?’ Vicky was surprised.

  ‘Yes, that’s the way my model works,’ Modi boasted.

  ‘That would mean that I will have to invest a few crores more for stocking the stores,’ Vicky said.

  ‘That’s correct.’ Modi nodded. ‘But that should not worry you. You and your wife can afford it. You can manage the chain and your wife can promote it. You’re hitting the jackpot here.’

  ‘And so are you,’ Vicky retorted. He knew that in reality, it was Mehul who had more to gain by this deal.

  Perhaps sensing that he might be losing Vicky, Mehul threw in a sweetener. ‘Well, if you don’t want to invest the entire amount, we can invest part of the money in your outlets, in return for a raised share in the profits.’

  Vicky nodded thoughtfully. ‘I’ll have think about it.’

  ‘Yes, do that,’ Mehul said before moving away to chat with the other guests.

  Vicky Malhotra stood, contemplating this new turn of events. Even though he found Mehul distastefully arrogant, the man had said something that Vicky hadn’t considered before. His wife was a star. He was a businessman. If they came together to start a business, they would mint money. After all, the Indian population was a sucker for stars, especially Bollywood celebrities, and with Pallavi’s newly rising fame, there was no way this wouldn’t work.

  But did he have to share this success with Mehul? No. So was there a way he could do it for himself? The conversation with Mehul Modi had got him thinking.

  14

  April 2015

  DELHI

  The day Aditya Kesavan’s appointment as the new RBI Governor was announced, the media went into a frenzy. Sexy, handsome and suave, Aditya had both the swag of a film star and the intellect of an academician. For women, he became a sex symbol. For men, he became an aspiration. Aditya Kesavan had arrived.

  In the first few meetings that he went to, he made all the right noises. When asked about his first impressions of the government, he would say, ‘This government has really come out in favour of the poor and those who need support. They have their priorities right. And, most importantly, they are honestly pursuing the mandate that the people of India have given them.’ Not a word that came out of his mouth could be considered even remotely controversial or anti-government. He was measured, positive and politically very, very correct.

  As far as the press was concerned, this new, attractive and charming governor could do no wrong.

  A couple of days into the appointment, Pande called the Prime Minister late at night. ‘I think we made the right choice. Aditya Kesavan has not put a wrong foot forward. We’ve found a big ally in him. Finally, there’s our RBI Governor on that seat.’

  ₹

  Living entirely in the limelight was completely new to Aditya. He might have always craved attention, but as an academician, he’d barely gotten it. And now hobnobbing with the who’s who of the country, being wooed by the press – all of it was flattering, but also overwhelming. Also, while he had received his fair share of female attention in New York, the kind of fawning he was experiencing was something he had definitely not expected.

  In India, when the media loves you, it loves you without reason – entirely and completely. And when it hates you, it hates you unconditionally. Aditya Kesavan, at least for now, belonged to the former category. He was enjoying his moment in the sun.

  He had no idea how things were about to change. No one had told him that in life, nothing is permanent.

  15

  April 2015

  DELHI

  Danish Khosla had just begun digging into his breakfast paranthas at his house in the upmarket Greater Kailash area of south Delhi when his phone rang.

  ‘Boss is very upset.’ Mike Smith, the CEO of Le Da Spire, said without so much as a hello as soon as Khosla picked up.

  It is not often that a CEO calls someone his boss. But for Mike Smith, Carlo Pinotti, the promoter of Le Da Spire, was definitely boss.

  ‘Tell Carlo that I am on the job,’ Khosla said.

  ‘Keep in mind that unless you do what you are supposed to, there will be no redemption.’

  ‘I understand, Mike.’

  ‘Not sure you do, Khosla. Boss asked me to call you and tell you that his patience is running out. You have not delivered for the money that has been paid to you. Carlo might be the quietest, but he’s surely not the kindest person around. You know that.’

  ‘I know. I know,’ Khosla responded. ‘I understand.’ He tried to sound as apologetic as he could. ‘But the Panama Papers’ revelation have resulted in an increased vigilance on anything to do with Le Da Spire. It has become so much more difficult.’

  ‘That’s your problem, Khosla. All Carlo wants you to know is that your time is running out.’ With that, Smith hung up.

  Khosla was infuriated. He wanted to tell Smith to take his money and stuff it, but he knew he couldn’t do that. Carlo, a very private person, was indeed very dangerous. The fact that Le Da Spire had been mentioned in the Panama Papers and linked with Danish Khosla had made things messy. Both Le Da Spire and Carlo wanted to get things over with before they careened beyond control.

  Le Da Spire had had, at one point in time, the exclusive contract to print currency notes for India, back when the notes were printed at the high-security printing press in Nasik. The capacity at the Nasik press had not been adequate, and the Indian government had then set up a new printing press in Mysore. Both these currency-printing facilities were managed by companies which were subsidiaries of the RBI and were eventually run by it. Le Da Spire was involved in supplying the security paper for printing. D
uring Harsha Ranjan’s tenure as RBI Governor, some discrepancies were found in the quality of paper supplied by it.

  There was also a strong suspicion that the paper supplied to clandestine presses in had also come from Le Da Spire. This fake currency was creating a serious law-and-order situation. The counterfeit trade had spread its tentacles deep into the Kashmir Valley and the notes being smuggled across the porous India–Pakistan border into Jammu and Kashmir were also being used to buy allegiance from the people of the state, thereby creating a nuisance for the Indian government.

  Of late, a similar problem had sprung up in Uttar Pradesh. RAW reports indicated that counterfeit currency printed on paper supplied by Le Da Spire was being flown from Pakistan to Nepal by commercial Pakistan International Airlines flights and then making its way to the border areas of UP and Bihar. This currency was then being distributed by NGOs which were hand in glove with the counterfeiters. The money was also making its way to the thousands of madrasas in the communally volatile areas of Uttar Pradesh.

  The entire problem of counterfeiting could be traced back to one factor – the supply of paper by Le Da Spire. Without that, the Pakistani printing presses would not be able to replicate the Indian currency to the level of accuracy that they did. Harsha Ranjan had taken serious exception to this and asked for a response from Le Da Spire. The latter had feigned ignorance, and the supply of paper to Pakistan did not stop. The matter had also been highlighted to the Finance Ministry. Harsha had pulled back all orders that had been placed and suspended all business with Le Da Spire, pending an investigation into the matter.

  It didn’t help that around the same time, Le Da Spire got into another mess with the RBI. A disgruntled employee at the Hampshire press went to the media with a piece of pretty damaging information about the company. According to a note submitted by him to the Guardian newspaper, the paper supplied by Le Da Spire disintegrated under drops of water. Ink wouldn’t stick to this paper, smudging instead when the note came in contact with water.

  Given the sensitive nature of the information and the panic that this could create among the public at large, the Guardian had not carried the story. But the newspaper did forward it to the law enforcers of countries which were Le Da Spire’s biggest clients.

  When the information reached Harsha Ranjan, he took it up with the company, and received in answer test reports guaranteeing the paper’s quality.

  Ultimately, the matter was dismissed as a storm created by a disgruntled employee.

  Only much later, just a few months before Marshe demitted office, something occurred which proved that the employee might have been right after all, and that the test results sent out by La De Spire might have been fabricated. In one of his last moves as RBI Governor, Harsha had initiated an independent test on the paper supplied and the results clearly confirmed the truth of the matter – Le Da Spire had sent false reports.

  The case was handed over to the Central Bureau of Investigation, but was not public information yet. Money was a sensitive, complex issue and anything related to it could create panic. But as far as the RBI was concerned, Le Da Spire was no longer a safe company to deal with.

  The company, though, couldn’t afford to lose India’s business. At 40 per cent, it constituted a sizeable piece of the overall pie, and was necessary for Le Da Spire’s survival. Measures had to be taken, and one of them was employing the services of Danish Khosla, the best-known fixer in Delhi, to bat for them in the corridors of power. And while their financial dealings with Khosla ultimately made their way to the Panama Papers, the background and context that had spurred them didn’t.

  ₹

  As soon as Mike Smith hung up on him, Danish Khosla dialled another number and waited.

  ‘Yes, Khosla.’ Finally the ringing was replaced by a voice.

  ‘Le Da Spire called.’

  ‘Okay’ The voice was dry, emotionless.

  ‘Pinotti is furious,’ Khosla pressed. ‘He has been sending word to me again and again and again.’

  ‘I understand. But this is in the remit of the RBI Governor. And unless this new guy in the saddle does something, we can’t make a move.’

  Khosla didn’t say anything

  ‘So my advice to you is, work on the RBI Governor. Aditya Kesavan is our man. He can choose to overlook the earlier investigation and get back in bed with Le Da Spire.’

  Khosla disconnected the phone, a little comforted by the fact that the Finance Minister had said ‘our man’.

  Now, it was time for Khosla to meet the RBI Governor.

  16

  May 2015

  MUMBAI

  The banquet hall of the Taj Mahal Palace in south Mumbai was teeming with CEOs and Managing Directors of banks. There were over three hundred people in the room. They were all gathered for the pan-India conference of bank chiefs – a meet where Aditya Kesavan was going to talk to them for the first time. It was a kind of tradition in the banking industry – a meeting used to flaunt accomplishments, air grievances and set the agenda for the next few years. It was also a stage for Aditya to lay out his thoughts – to communicate to the bank chiefs and the world at large what his expectations were and what his operating style was going to be.

  All eyes were on Aditya as he walked up on stage with the chiefs of the six largest public sector banks. One by one, all of them were called upon to speak.

  The chairman of the State Bank of India spoke first. He spoke about growth and the SBI’s focus on agriculture. He lamented the lack of growth of corporate credit and the lack of talent in the public sector banks because of low salaries. Government interference and non-performing assets were next in line. The chairman spent a fair bit of time speaking about high NPAs, the lack of tools available for resolution and impact of high NPAs on bank profitability. He also spoke about the lack of empathy from the RBI regarding the rising levels of NPAs. He almost accused the RBI of not intervening to help the banks with high NPAs get through the difficult phase.

  Once the SBI chief had set the tone, everyone else followed suit, nearly all of them reiterating the issues raised by him. Aditya sat there patiently, listening to everyone speak and fighting his urge to interrupt them and justify himself. After all, even though the bank chiefs blamed the RBI, they were not blaming him. He had just taken over, and they were only imploring him to do something about the concerns they had. So Aditya Kesavan listened carefully, making a note of every single issue they brought up. He was paying complete attention, and when the steward came around asking for tea or coffee, he shooed him away, not wanting to be disturbed.

  And then, finally, it was his turn to speak. He climbed up the podium, took his place and after the initial customary pleasantries, began.

  ‘All of you said that the NPAs and delinquent loans are the biggest challenges the banking industry faces today … that we face today.’ He paused and looked around the room. He saw heads nodding in acknowledgement. ‘You know what? You can deal with a challenge if you know what you are up against. Today, we do not even know what the magnitude of something that we call our biggest problem is. Evergreening, round-tripping, NPA management have queered the pitch. And to top it all, we all misreport the NPAs that plague us. In fact, how many people present here can say with certainty that the NPA figures you report in your financials are the correct numbers? How many of you can say with certainty that there isn’t a single loan which is an NPA and has not been reported? Not one of you can raise your hand in response. And if you do, you’d be lying. I know that, you know that and He knows that,’ he said, pointing a finger towards the ceiling. Towards God.

  ‘A delinquent customer will not do so if he knows that going delinquent with one bank would mean not getting another loan from any other bank. But in our country, people who don’t pay back one bank have other banks falling over each other to give them loans. Is something like that even sustainable? Doesn’t it deter defaulters from paying back even when they can?’ He paused for effect and then began again.

/>   ‘You, my dear friends, you are responsible for the NPA problem that we have today. The RBI and the Finance Ministry are just trying to make things better for you by highlighting the magnitude of the problem and its financial impact. They are trying to put it to rest so that you can close the issue and move on. They are not the problem here. The problem is the system that has become the norm. We are just trying to fix the problem. The day you’ll understand that, we will stop fighting about issues and begin working together.’

  Aditya paused and found that there was stunned silence in the hall. He let it ring for a while, then began again.

  ‘You talk of political interference in lending to corporates. Let me ask you a simple question. How many of you would have reached this position without political interference? How many of you would be sitting in this chair because you are genuinely more deserving than the other candidates who had been considered when you got the job? If you didn’t complain of political interference when you got the job, you have lost the right to complain now.’ There was an almost inaudible but collective intake of breath. Aditya Kesavan was on the warpath.

  ‘Now, let me address the issues that you have. The NPA issue will go away. Either we will recover outstanding dues from the defaulters or, if we can’t, laws will be suitably amended to help us recover the losses. Banks will be recapitalized. We will go to the central government with that proposal.

  ‘But what are you going to do about the elephant of an infrastructure that you have? No one goes to bank branches these days. And yet you have hundreds of thousands of them. How do we get people back into the branches? And how do we make sure that delivery of non-branch channels is world-class? Soon, technology will lead us to a point where people and branches will become redundant. How will you deal with large-scale redundancies? We also have an obligation to society – our social cause towards banking for the poor and generating employment. How will we continue doing that? Hiring people is not enough; having them gainfully employed is the challenge. An idle mind is the devil’s workshop. People who have time on their hands will find a way to commit fraud, thereby making the banking system susceptible. These problems are larger than the ones you’ve spoken about. They are softer in nature but gigantic in impact. I’m surprised that no one brought them up. Do you realize what nimble-footed small finance banks and tech-oriented payment banks can do to you? Do you realize what virtual currency can do to the entire banking system of the country? How long can we protect our banking system? A wave will come one day and sweep the entire industry away. We can either wait here like sitting ducks or we can all get together and revolutionize the industry. The choice is yours. Ladies and gentlemen, the choice is yours.’