Image used for representational purpose only.
Image used for representational purpose only.

Balancing prompt decision-making with rooting out graft

The arrest is a big setback to the industry as it comes days after the Union government absolved bankers from flak for business decisions gone wrong.

Shock waves have hit the banking industry after former State Bank of India chairman Pratip Chaudhuri was arrested and remanded in judicial custody on Monday following the directions of a Rajasthan court. The case relates to the sale of Hotel Gaudavan in Jaisalmer, a non-performing asset (NPA), to Alchemist Asset Reconstruction Company (ARC) at allegedly 10% its market value. The petition before a judicial magistrate claims the former SBI chief had manipulated this under-valued sale in 2014. Several bankers have expressed their dismay, while the industry body, the Indian Bank Association (IBA), has pointed out that “the sale of assets are financial decisions and these are executed by adhering to strict due diligence norms”.

Prima facie, the Rajasthan magistrate seems to have embarked on cowboy-style justice without necessary legal process. Both the SBI, which sold the hotel asset after a payment default, as well as the buyer of the asset, the Alchemist ARC, were not made parties to the case. Chaudhuri appears to have retired from the SBI about six months before the asset was sold to Alchemist ARC. On the other hand, soon after his retirement, he became chairman of Alchemist. It is not clear whether he was arrested for his role as SBI chief or as chairman of Alchemist ARC.

The arrest is a big setback to the industry as it comes days after the Union government absolved bankers from flak for business decisions gone wrong. NPAs in the hands of banks have eroded value and cannot be compared to the market value they once commanded. In the long run, this kind of criminal action will push bank managers back to the point of indecision. It is the last thing we need at a time when the economy needs expansion of credit. On the other hand, despite all the institutional checks and balances, corrupt bankers continue to bend the rules to favour a select few. As it is, former ICICI Bank CEO Chanda Kochhar is facing charges of helping Videocon Group with a loan of `3,250 crore. While bankers have to take prompt and correct decisions, institutional safeguards too have to be strengthened to guard against corrupt officers

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The New Indian Express
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