Voicing serious concern against big corporates whose bad loans have put banks in a fix, finance minister P Chidambaram on Monday said, “We cannot have an affluent promoter and a sick company.”

While the finance minister named no names, indirectly his reference was aimed at fellow parliamentarian, liquor baron Vijay Mallya, whose Kingfisher Airlines is in the red and is accused of not repaying bank loans running into thousands of crores. At the same time, Mallya’s flamboyant lifestyle is at its peak.

Kingfisher has about Rs 7,000 crore as bank loans — a bad loan, or non-performing asset (NPA) for the banks now. It has been more than a year that the world came to know the truth about Kingfisher Airlines, more specifically its drastic fall, though the finance, it seems, is waking up only now.

Kingfisher’s, however, is only a small pie of the whole amount of NPAs, which stood at Rs 1.55 lakh crore as on December 2012, and Mallya is not an odd apple in the India Inc basket. According to last year’s Credit Suisse Group AG report, 10 large industrial groups constitute 13 percent of the entire Indian banking system’s loan assets.

This brings up a simple question: why have banks been silent on this issue all this while? Why did they not act and, through their inaction, let the crisis balloon to such an extent that NPAs have doubled from 2009 to 2012?

“Promoters must bring in money... Without doing anything that will kill the business of industry, banks will have to take steps to recover NPAs," Chidambaram said.

Bang on, why should the country’s finance minister need to remind banks about their duty to collect repayment of loans from bigwigs? Why, moreover, was no action taken against top officials of these banks with bad loans?

It is no secret how bank loans are given to big industrial houses: doled out mostly on face value, the companies are often accused of fudging their balance sheets to show loss, and then try numerous methods to somehow get rid of such loans. This has become as good as the norm, while at the same time, a salaried individual earning a few lakh rupees annually needs to submit two dozen papers and make several rounds of the bank to get any five-digit bank loan — that, too, being at the whim of the bank’s branch managers!

In 2010, then chairperson of the standing committee on rural development and Member of Parliament from Indore, Sumitra Mahajan, had raised the issue of bad loans. "Why not blacklist the entire group that is sitting on huge credit limits from banks?" Mahajan had asked in a written communiqué sent to then finance minister Pranab Mukherjee.

But a year since the Kingfisher Airlines story started unravelling, and the company’s bad loans are not even top news, no action has taken against it.
Since 2010, NPAs have risen dramatically but the accountability of such bad loans is yet to be fixed in concrete terms. In the first week of March, people’s initiative in Switzerland led a movement through petition to limit ‘fat-cat’ pay of top honchos whose firms went bust. Can the ‘fat cats’ of India Inc be fixed similarly, and within a time frame that is not deemed ludicrous? Can banks finally wield the stick now?