27
Jan–March 2016
MUMBAI
Suyog Gold was a big and instant success. On the day of the launch, they raised ₹23 crore under the wait-and-collect scheme. Most of the people had bought gold under the pay-70 per cent-and-wait-for-three-years plan. In their minds, they were paying ₹70 for something worth ₹100 today, and which could be worth significantly more three years from now. The benefits were immense. Even the Indian Bullion and Jewellery Association (IBJA) threw its weight behind Suyog. IBJA was the apex jewellery association in India, which helped its members in promotion and marketing of their products, arbitration of disputes and also acted as a lobby for all the traders. It even allowed Suyog Gold to use its logo on their ads for a fee of ₹20 crore for five years. It lent credibility to the venture.
Vicky Malhotra was thrilled. His thoughts went back to the ₹30 crore that he had raised for MyBestDeal.com from a cooperative bank. That had been a struggle. And now, this ₹23 crore that he’s raised on day one through Suyog gold was free money for three years. The earliest he had to give gold back was after thirty-six months. Till then he could keep and enjoy the proceeds of the scheme.
Like a Shah Rukh Khan movie, Suyog Gold’s collection crossed a hundred crores in the first five days. Vicky was over the moon. Pallavi’s magic had worked. He had consciously started the company in her name and made her the face of the brand. ‘This is where your name will sell’, he had said. All the paperwork and the formalities were in her name.
The massive revenue emboldened the businessman in Vicky. He stepped up the advertising for the scheme. TV ads, bus shelters, online advertising, movie theatres Suyog Gold was everywhere. Vicky had allocated a budget of ₹20 crore towards advertising. He had upped his collections’ target from the initial 250 crore to 1’000 crore. He even expanded the number of cities where he had launched this scheme from ten to sixty.
It was the next big thing in jewellery sales.
Or so they thought.
28
March 2016
DELHI
The Financial Services Secretary, Ranjeet Kumar, called Aditya that Sunday. ‘The Finance Minister wants to meet the Bank Boards Bureau Chief, you and the Monetary Policy Commission tonight at nine.’
Aditya didn’t like Ranjeet Kumar. The arrogance of the man riled him. Despite being thrown together often due to their overlapping roles, the two remained cold and distant with each other.
‘Agenda?’ Aditya asked.
‘Bank recapitalization. To find a way out of the NPA mess.’
That explained the presence of the BBB Chief, Aditya thought. The BBB was supposedly an autonomous body set up by the Government of India with a view to improve the governance of public sector banks (PSBs). It was the bureau’s responsbility to identify and recommend talent to head PSBs. It also helped them strategise for growth and assisted their capital-raising plans.
‘North Block or his residence?’ Aditya queried.
‘Neither. The FM is addressing a team of business leaders from the UK this evening. It will be immediately after that. I will let you know the venue.’
‘Will be there. You will coordinate with the rest, I presume.’
‘Already been informed,’ Ranjeet responded curtly.
‘Thank you.’ Aditya was equally cold. He didn’t like the fact that Ranjeet Kumar had chosen to inform him last of all. In the pecking order, he was the senior-most. But then this Finance Minister was not the one to care about protocol. His team also embraced his working style.
₹
Pallavi Soni was in Delhi’s Greater Kailash area that day for the launch of a jewellery store which offered the Suyog Gold plan to its customers. Vicky Malhotra was with her. They had launch events at two other stores the next day. While Pallavi was a pro at handling the crowd, Vicky was finding the rush difficult to cope with. Delhi’s dry heat, coupled with the hundreds of people thronging the narrow bylanes of the Greater Kailash-1 M-Block market to catch a glimpse of Pallavi Soni, was tiring him out. He wanted to head back to the hotel as soon as they were done with their appearances for the day.
As they entered the Taj Mahal Hotel in Chanakyapuri, Vicky received a call on his phone. Pallavi waited in the lobby for some time while he talked, smiling at many onlookers who recognized her. She was a popular face and loved the attention that came with it. The GM of Taj hotels, who was in the lobby, came up to her and extended a warm welcome on the hotel’s behalf. She politely smiled and nodded at him but didn’t hear a word of what he was saying. Her eyes were trained at the main entrance of the Hotel, walking through which was Aditya Kesavan, two uniformed guards in tow. She smiled and waved at him but Aditya spot her.
‘Excuse me.’ She excused herself from the GM and walked towards Aditya. Vicky was still on the phone. ‘Hello, Aditya. What a surprise to run into you here!’
‘Oh! Hello, Ms Soni.’ Aditya was happy to see her too, but the group he was with made him refer to her formally. However, he excused himself from the others and walked with Pallavi towards where Vicky was still talking on the phone.
‘So,’ Aditya asked her as they walked together. ‘Business or pleasure?’
‘A bit of both,’ Pallavi replied. ‘And that “Ms Soni” was so fake. Is that how you address everyone?’ She laughed and to Aditya, it was as if a hundred angels had descended into that hotel lobby. ‘Anyway, I am sure for you it is business, business and business,’ Pallavi, unaware of the effect she was having on him, continued.
‘I’m afraid you are right. It’s business. The Finance Minister has called for a meeting on the sidelines of a conference happening in this hotel,’ he said.
‘But that’s wonderful. We are staying here. Why don’t you join us for dinner?’ She turned and looked at Vicky but he was still on the phone. ‘After you are done with your meeting.’
‘That might go on for long. These meetings typically last for a couple of hours at the least. And today’s is an important one.’
‘No sweat. Then how about a post-dinner drink?’ Pallavi asked as she looked at him. ‘I won’t force you. But we would love it if you say yes.’
‘Sure. Let me see. I’ll try for sure,’ Aditya said and Pallavi nodded, satisfied.
‘Say hi to Vicky,’ Aditya said before turning to leave. The meeting with the Finance Minister was to start in fifteen minutes, and Aditya was a stickler for time. He knew the FM would most likely be late. But that didn’t mean Aditya had to be late too.
Just before getting into the lift, he turned and waved to Pallavi one last time.
29
March 2016
DELHI
The Finance Minister was already in the room when Aditya entered. Pande was flanked by Ranjeet Kumar, the BBB chief and a few others. The members of the monetary policy committee were also in the room, though Aditya didn’t know what their role was in this meeting. He himself was accompanied by two Deputy Governors.
After the initial courtesies, the meeting began. Ranjeet Kumar circulated a note, which outlined the Finance Minister and the BBB chief’s views on the NPA crisis. Aditya read through it. Most of the inputs for the note had been given by his team. A couple of press clippings were also attached.
The rise in advances, coupled with the stringent capital adequacy requirements imposed by the RBI in the wake of the Basel III norms, high levels of NPAs and the poor performance of PSBs have led to significant capital erosion and requirements for further capital—both for replenishment of the base eroded by NPAs and fresh ones for giving loans.
‘The press has already caught on and is talking about the crisis,’ Ranjeet murmured when he saw Aditya read through the clippings.
Aditya reached the last page of the note and stopped. The figure there hit him hard. Even though he had known it, it was still hard to digest. Two hundred thousand crores.
Ranjeet Kumar stood up and walked to the head of the table. He stood next to the Finance Minister. ‘As per estimates provided by the Reserve
Bank of India, the NPAs have been massively understated. The current declared NPA numbers of around 8 per cent are far from the truth. As per estimates provided by Mr Aditya Kesavan, the NPA is at around 22 per cent. In rupee terms, that translates to eight hundred and fifty thousand crores. Even if the banks do recover the dues from these loans, it is safe to assume that a small percent of these will surely turn into losses, thereby eroding the entire capital in the public sector banks. Not only will the banks start making losses, their net worth will turn negative. This scenario leaves us with no choice. We have to infuse more capital in the banks. And, as per our estimate, to get the banks to become robust again, we need to infuse two hundred thousand crores into the banking system with an incremental two trillion rupees as capital.’
There was pin-drop silence in the room. The figures had stunned everyone. Kumar carried on speaking. ‘This is not the first time that the banks will be recapitalized. From 2001 to 2016, various governments have recapitalized banks to the tune of ₹120,000 crore. But this one is different. Both in terms of size and intent,’ Kumar said.
‘And where is the money going to come from?’ Aditya interrupted.
‘Hold on, Mr Kesavan. Let Mr Kumar complete,’ the Finance Minister stepped into the conversation.
Aditya bristled at being chided in public and Ranjeet Kumar switched on the projector, a smug smile on his face. A slide came up on-screen. It had RECAP PLAN in bold written across the slide. At the bottom right-hand corner, in small letters were the words, Draft note for discussion.
‘So here is what we propose.’ The next slide came up on-screen. The plan was detailed on the slide.
‘Two hundred thousand crore recapitalization plan spread over two years. It will be raised through a mix of four initiatives.
A) Issuance of bank recap bonds, which will be payable over a long tenure.
B) Sale of government stake in public sector banks.
C) Budgetary allocations and
D) The RBI.’
Aditya suddenly sat up. If the mention of bonds being raised and stake sale of banks didn’t rile him, the last point certainly had him up in arms. ‘No one thought it necessary to take the RBI into confidence about this. Especially given the fact that RBI was the one who had flagged off the issue in the first place,’ he complained.
‘That is exactly what we are doing right now, Mr Kesavan,’ Kumar responded, his voice coldly polite. He had the FM’s support.
‘You will see why we are doing what we are doing, Aditya,’ Siddharth Pande chipped in. That made Aditya even more angry. Clearly the FM and the Secretary were in cahoots. He had been kept out of the discussion. But when the Finance Minister says something, there is little you can do.
‘So,’ Ranjeet Kumar continued. He clicked on his slide mover and brought up the next slide.
‘This slide details what we will do.’
Total Required 200,000 crores
This Year Next Year
Budgetary Provisions 13000 Cr. 13000 Cr.
Recap Bonds 75000 Cr. 78000 Cr.
Share Sale 9000 Cr. 12000 Cr.
‘We will make budgetary provisions to the tune of 13,000 crores this year and another 13,000 crores next year.’ He continued explaining what was on the slide. ‘A hundred and fifty three thousand crores of bank recap bonds will be issued. Seventy-five thousand crores this year and the balance next year. The Prime Minister has agreed to this,’ Kumar said.
Ranjeet Kumar put a slide on-screen and continued, ‘We will sell the governments stake in PSU banks and raise another ₹21,000 crore – ₹9,000 crore this year and 12,000 crore next year. A bank recap of this magnitude has to be first agreed upon internally and also needs nods from the Cabinet and Parliament.’
Aditya was stunned. All this had been laid out without consulting him. Though it was not mandatory for him to sign off on the way the government was going to fund the recapitalization, it was the lack of basic courtesy which riled him. The RBI was the key stakeholder in ensuring the health of the banking system in India.
He spoke up, unable to stay silent any longer. ‘You cannot announce this recap plan without reforming the working and lending practices of the banks. They have to change the way they do business. Unless we improve their functioning with better performance monitoring, risk practices and lending reforms, this will just be throwing in good money after the bad. You will infuse two hundred thousand crores today, but the banks will not change the way they work, and they’ll keep lending money in the same manner that they have done till now. We will find ourselves discussing further recapitalization to take care of poor lending practices two years from now. ‘
‘That is anyway WIP, Aditya,’ Pande interrupted him. ‘The HRD Ministry is working at training bank employees on technology, credit and process controls.’
‘This is not a job for the HRD, Hon. Minister. It is something we, the RBI, have to do, as the regulator, as the ones responsible for the business of banking in this country, along with the BBB.’
‘I do not see that as an issue, Mr Kesavan.’ The BBB chief now stepped into the conversation. ‘You must be aware of what we are doing to increase public accountability of PSBs. In any case, this is something we can talk about later.’
Ranjeet Kumar was getting impatient and interrupted the conversation. ‘If all of us are broadly in agreement with the terms being laid out, we will get cracking on the nitty-gritty. We need to present this in the upcoming session of Parliament. Ideally, this should have been a part of the budget, but since the next budget is some time away, let’s aim to get it into the winter session.’
Suddenly Aditya remembered something. ‘Wait. You haven’t explained point D. All it had said was “the RBI”. What did that mean?’
‘Ah yes, that,’ Ranjeet said nonchalantly. ‘That concerns the budgetary allocation of ₹13,000 crore in year one and a similar amount in year two. Slide 1,’ he reminded Aditya, a smirk on his face.
‘But what’s the connection to the RBI?’
Ranjeet looked at the FM who just nodded, indicating that Ranjeet was to continue. ‘Mr Governor,’ Ranjeet began cynically. ‘That amount is the additional dividend that the RBI will pay the government this year and the next, to make up for the shortfall that will arise out of the budgetary allocation. You see, the allocation has to come from somewhere. That’s where the RBI will pay the government an enhanced dividend and bring in the revenue to compensate that spend.’
Aditya was shocked beyond words. ‘Are you serious?’
‘What in my demeanour gives you the indication that I might not be, Mr Kesavan?’ Ranjeet retorted drily.
‘How could you even put that up without checking with me?’
‘Well, I checked with the Finance Minister,’ Ranjeet said, gesturing towards the minister, who sat like a silent spectator to this almost public spat.
‘The dividend that the RBI pays the government is in the remit of the RBI, not that of the finance ministry or your department. You are the last person I expect this sort of faux pas from,’ Aditya countered, his voice growing louder with each word.
‘It is not a faux pas, Aditya. And it was discussed with me,’ Pande interjected curtly. ‘I agreed to it. In fact, when the budgetary allocation was brought up and ways and means to plug the shortfall were discussed, it was me who recommended to Ranjeet that we increase the dividend the RBI pays the government. If you wish to discuss this with me separately, I am happy to do so.’ He picked up his folder from the table and got up from the chair. ‘But before you do any of that, let me tell you that the PM has bought in on this plan and any change to this has to be discussed with and agreed to by him. This is not about the RBI or about you. It is about the nation.’ That was clearly the end of the discussion. The PM would not entertain any objections to this plan. Aditya knew that.
The FM stepped out of the room. And one by one everyone else followed suit. Aditya couldn’t help but notice the spring in Ranjeet Kumar’s step.
Finally,
Aditya was alone in the conference room. And clearly, he was alone in the RBI; alone in his decision-making. Or did he even have any decision-making powers anymore? He had left a serious role in academia to be a part of this circus. And that’s exactly what it was, wasn’t it? A circus? All of them with their official, important-sounding designations were really just clowns dancing to someone else’s tunes. He wanted a break. Desperately. Already.
He got up and looked at his phone. There was a message from Pallavi. ‘11th floor. Suite No 3. We are nocturnal creatures. Come over once your work is done. We will be happy to see you.’ The message had come an hour back, midway through his meeting. On an impulse, he decided to take up her offer. It would be a good way to clear his mind, he thought.
Slowly, he walked into a waiting lift and pressed the button to the eleventh floor. Within minutes, he was outside Suite No. 3. He stood in front of the door, straightened his tie, tucked in his shirt properly and reached out to ring the bell.
30
March 2016
NORWAY
Carlo Pinotti woke up on a tiny island in the Longyearbyen district of the Svalbard Archipelago in Norway. Midway between the farthest part of the Norwegian land and the Arctic circle, the Svalbard Archipelago is one of the remotest places on this planet. So remote that it is home to the Global Seed Vault, the secure seed bank that facilitates conservation of seeds comprising important genetic material for food and agriculture. In more ways than one, it is the modern-day equivalent of Noah’s Ark. The Global Seed Vault acts as a repository for the seeds, which are kept there in case of any eventuality that might require humans to start again and reignite life on this planet.
Pinotti delighted in remote places. An extremely guarded individual, he protected his privacy ferociously. He always travelled without any security cover or entourage, and for the last four years, he’d only had one other person accompany him on his trips – his girlfriend, Kelly. He almost never took a private jet, choosing instead to fly commercial. He believed that it would be much more difficult to get to him on a commercial jet than a chartered flight. Targeting a flight with over 500 passengers was a tougher proposition than a private jet with ten people on board. Not that people were out to kill him. It was just that he felt safer in the anonymity of a crowd. Well, except when he was on vacation. Then he preferred the remotest, least-inhabitated places he could find. No one in Svalgard that day would realize that he was the owner of a multibillion-dollar enterprise.
Don't Tell the Governor Page 8
