A scam primer

"The Great Bank Robbery" is a compilation of scandals that have occurred in the financial world, making it a good resource for someone who is not familiar with technical terms and scams in India

The Great Bank Robbery: NPAs, Scams, and the Future of Regulation

Author: V Pattabhi Ram & Sabyasachee Dash

Publisher: Rupa

Pages: 361

Price: Rs 595

Usually, an introduction or a foreword is good enough for one to assess the width and the depth of a book. The foreword by Bibek Debroy does not disappoint us. Obviously, when there is a request for a foreword, telling readers upfront that the book makes no significant point is challenging. Irrespective of how crude the public discourse may have become, book forewords are written in decent language with adequate rope of benevolence given to the authors. And Dr Debroy is a well-regarded scholar. So, he overcomes a possible embarrassment in endorsing the book by talking more about the title, which is undoubtedly impressive and aspirational. And he delves into a movie around the same name, other films and even a Sherlock Holmes title. From that, the reader can infer that the superlatives such as “remarkable” notwithstanding, the commentary is more about the ecosystem in which the financial sector scams have occurred and also about the regulatory ecosystem.

The book is structured as a series of short insights that could be at best blog posts on the various scandals that have haunted the financial sector. So, it is not exactly a bank robbery, but a scam series. These blog type of writings are preceded by conversations between a grand old man who knows everything, a junior who is in Harvard and a much smaller kid who wants to write a school essay. These conversations, which occupy about half of the book, tend to add a bit of context, but also a fair amount of loose comments. This context-setting portion also provides the technical definitions of the terminology used, usually pitched at a juvenile level — not necessarily a 101 rendering — but more at a high school text book level.

In the preface, the authors say, “We have tried to keep things engaging while steering clear of market masala. We believe who we vote for has nothing to do with what has happened in the banking world and the objective is to stay with facts.” However, they neither keep away from the market masala nor their political leanings. In the chapter on the Mundhra and Nagarwala scandals, they say this: “And there was an unsubstantiated charge that money changed hands between Mundhra and Congress”. This is followed up by, “He guessed that this case, too, might involve the Nehru-Gandhi family” and the following pages have this: “But in either case the Congress party is not coming out smelling of roses” or in Chapter 19: “A commission passed strictures on the Congress party; Chacha Nehru snubbed the judge and later apologized”. But that may be par for the course. After all, it is a narrative licence to make the old scandals sound contemporary and interesting.

The book deals with most of the scandals that have occurred in the financial world. There is a common format: It starts with an explanation of the technical terms (such as banker’s receipt in case of the Harshad Mehta scandal), a context-setting that is captured through the three-generational conversation in the Stephen family. Then, the grand old man of the family would have written a note about it which is presented in a box. This box lives to the promise: Facts, no gossip and no political overtone. Both are presented in a simple language and would have been better without the facile banter that does not add any value to the book.

In general, the authors have the concepts right, explaining stuff in a simple manner, assuming that the reader is not an adult. But somewhere they get muddled up in explaining asset-liability mismatch where they assert that “short term borrowing costs lesser than long term borrowing” because “short-term loans are less risky and so cost less interest”. Really? Any examination of the amount of debt papers available and their specified coupon rates would indicate the obverse. There is also a minor mistake, where they call Unity Small Finance Bank the Unitus Small Finance Bank. 

The book starts in the prologue set in the future where the powers-that-be are trying to deal with a bank scandal. The book ends with threads that are picked up from the scandal in the prologue to give a picture of the digital future that is to come. No, it does not quite read like science fiction, but tries to present an invasive financial sector as a fact of life. It also paints banks at three levels — delighting the full implementation of the Nachiket Mor committee, without explicitly saying so. L1 Banks are supposed to raise money from small savers to be invested in super safe securities (are these not payments banks?); L2 Banks are supposed to raise large-ticket funds and lend to corporations (wholesale banks, except that the authors do not envisage a licensing framework); and L3 are regulated banks without small savings, something even Mr Mor did not think of. While they are existing in such a futuristic world, the National Bank of Hindustan seems to be an old world bank with an old world failure with old world problems, non-performing assets, bad business judgements, frauds and creative accounting practices. It is not easy to write a future fantasy guided by current considerations. That is evident, in another flattering fun event for readers of this newspaper. With all pervasive technology, robotics and machine learning, the newspaper continues to be Business Standard, being read with a piping hot cup of coffee, in Goa!

This is a primer for technical terms and to scams in India. Notwithstanding, its purpose, it is an irritating book to engage in largely because it does not define the reader — whether it is a child, a common person, a student of business. This book is certainly not addressed to the decently informed.

mssriram@pm.me. The reviewer is faculty member, Centre for Public Policy, Indian Institute of Management, Bangalore