The India Cable: Banking on Defaulters a Bad Idea, Nivar to Make Landfall
The India Cable: Banking on Defaulters a Bad Idea, Nivar to Make Landfall
Plus: UP criminalises conversion for marriage, Indian courts’ falling international stock, Covid under-reported, Ahmed Patel dies, and lehenga makers in knots as bride wears pantsuit
From the founding editors of The Wire—MK Venu, Siddharth Varadarajan and Sidharth Bhatia—and journalists-writers Seema Chishti, Sushant Singh and Tanweer Alam. Editor: Pratik Kanjilal
Snapshot of the day
November 25, 2020
Pratik Kanjilal
The wind system Nivar over the southwest Bay of Bengal has burgeoned into a “severe cyclonic storm”, with serious damage expected to standing crop, plantations, orchards and thatched homes in Tamil Nadu, Puducherry and Andhra Pradesh, which are all on high alert.
As schools open and close spasmodically in various states, the Delhi government has faced up to the inevitable ― schools in the capital may remain shut until a vaccine is delivered. The biggest Muslim graveyard in the national capital is running out of burial space amid rising Covid-19 deaths. Coronavirus victims from other NCR areas are also being buried here. But those with anxieties about going out shopping can relax ― a study by the Bank of England has found that the risk of catching the viral infection through currency notes is low.
The Supreme Court has sought a response from the Centre on a petition seeking the imposition of a uniform ceiling price on the RT-PCR test for COVID-19 across the country. From 100% RT-PCR tests at the start of the pandemic, India is now down to less than 60%, which means that the country has not reported perhaps 3.4 million Covid cases because of the deliberate increase in the use of the less reliable antigen tests. Senior Congress leader and party treasurer Ahmed Patel passed away at the age of 71 early this morning, due to complications related to Covid-19.
The Supreme Court has held that the Union and state governments can’t occupy an individual’s property indefinitely, as economic liberty is a valuable right guaranteed under the Constitution. It has also lifted the gag order imposed by the Andhra Pradesh high court on media coverage of the Amravati land scam, where two of those accused are children of a sitting Supreme Court judge.
Adjourned for two weeks is the Supreme Court’s hearing on Republic TV owner Arnab Goswami’s plea against the privilege notice issued by the Maharashtra Legislative Assembly secretary. Predictably, the Enforcement Directorate has raided the premises of Shiv Sena MLA Pratap Sarnaik, who had initiated the breach of privilege motion. Former BJP minister MJ Akbar and journalist Priya Ramani have refused a settlement in a Delhi court in the criminal defamation suit which he had filed against her for an article which opened the floodgates to accusations of sexual harassment by multiple women againt the editor-turned-politician.
The Indian Medical Association demands withdrawal of a notification authorising post-graduate Ayurveda practitioners to be trained to perform general surgical procedures. It says that the move is a “khichdification”, or a confused mix of medical education and traditional practice. Agitated allopaths had used words like “quackery, mixopathy and crosspathy” in an earlier press release.
The efficacy of the Russian Sputnik V vaccine is 91.4%, based on the second interim analysis of data obtained 28 days after administering the first dose, and seven days after the second dose. The Russians declared that the cost for one dose of the two-dose vaccine internationally will be less than $10. But the Indian PM still doesn’t have a plan for vaccinating the people.
Continuing with its retaliation against Chinese military aggression in Ladakh, the Modi government has blocked 43 more mobile apps, including shopping website AliExpress, which is owned by e-commerce behemoth Alibaba. Other popular apps banned include WeWorkChina, CamCard and Snack. They were banned for engaging in activities “prejudicial to the sovereignty and integrity of the country, defence, security of the state and public order.”
About one lakh farmers from Punjab alone are converging upon Delhi in their tractors and will dig in until their demand for the repeal of three farm laws hustled through by the government is heard, said the All India Kisan Sangharsh Coordination Committee. The Agriculture Ministry has invited farm leaders to come to Delhi for talks on December 3, but the “indefinite siege” of Delhi is expected to start tomorrow. A mobilisation on this scale has not been seen in the capital since the agitation of Mahendra Singh Tikait, whose tractor rally had physically besieged the government about three decades ago.
An Indian bride wore a pantsuit to her wedding, unwittingly making a political statement and causing a scare among fashion designers who make a killing by selling bridal lehengas, in case the trend catches on. HuffPost India has shut its India operations, and the platform is no longer available. It is the first casualty of the Modi government’s new FDI restrictions.
Nivar strikes today
Tamil Nadu, Puducherry and Andhra Pradesh are in a state of high alert due to Cyclone Nivar, which is expected to intensify into a very severe cyclonic storm tonight. It is likely to cross the Tamil Nadu and Puducherry coasts between Karaikal and Mahabalipuram late on Wednesday evening, with wind speeds in the range of 120-130 km per hour, gusting to nearly 145 kmph. More than 120 mm of rain has been recorded in Chennai since yesterday. Tamil Nadu and Puducherry have declared a public holiday today. Many trains and flights have been cancelled and all three ports in Chennai are closed. The sea will be very rough, and fishing boats have been called back.
Thousands of policemen, including commandos trained in disaster operations, have been deployed along the coastal areas, along with teams of the National Disaster Relief Force. The Army is also ready to deploy 12 Humanitarian Assistance and Disaster Relief (HADR) teams and two Engineer Task Force units during Cyclone Nivar.
Goodbye, Ahmed Patel
Dawn broke today with news of Ahmed Patel’s death. Patel had tested positive for Covid-19 on October 1 and had been admitted to the ICU at Medanta Hospital in Gurgaon on November 15. Congress treasurer, Lok Sabha MP for three terms, and five terms in the Rajya Sabha, the 71-year old Patel remained the “irreplaceable comrade” that party President Sonia Gandhi referred to him as till the very end. Tributes and anecdotes have poured in steadily during the day, and marked how many political lives he had touched.
The last Muslim MP to be elected to the Lok Sabha from Gujarat, Patel is said to have lost in 1989 because the Vishwa Hindu Parishad’s wall graffiti drew attention to his faith ― he was not ‘Babu Bhai’ but ‘Ahmed Bhai’. His role in steering the Congress during the heady but rocky UPA years is well known to all those who did business with him. A shrewd political manager who saw, understood and wielded power, Patel never aspired to ministerial posts but attacked political problems deftly when his party was out of power. Keeping the office of the reclusive Sonia Gandhi ticking was among his most crucial jobs. Across the non-BJP spectrum, if there was someone who could get the job done, completely avoid the media glare, yet remain accessible, it was Ahmedbhai Mohammedbhai Patel, the man from Bharuch. Today, his body makes its final journey to his village, Piramal.
‘Unprincipled conversion 2020’
Despite the Allahabad High Court coming down hard on the idea that religious conversion for the sake of marriage is somehow illegitimate, the UP government took time out from the battle against Covid – which has racked up 529,000 cases in the state – to issue a controversial ordinance against religious conversions. Those converting to marry into another faith can spend up to a decade in jail. By default, that means Hindu women converting to marry Muslim men. The ordinance passed by the UP cabinet on Tuesday does not mention the trumped-up term ‘love jihad’, which is an Islamophobic theory that claims that Muslim men entice Hindu women into conversion under the pretext of marriage, and the draft has been named ‘Vidhi Virudh Dharmantaran 2020’ (roughly, ‘Unprincipled Conversion 2020’).
Uttar Pradesh Chief Minister Yogi Adityanath. Photo: PMO
Ironically, the Special Investigation Team which was set up by the UP Police to look into the alleged plot by Muslim men to entice Hindu women into marriage has drawn a blank, ruling out any conspiracy or external funding over the past year in Hindu-Muslim romances in Kanpur district. It was just love, unfortunately for Chief Minister Adityanath who, as head of his Hindu Yuva Vahini militia, had led aggressive and often violent campaigns in UP against interfaith marriages.
3.4 million Covid cases in India not reported
India has not reported 3.4 million Covid-19 cases because of a deliberate increase in the use of unreliable antigen tests. States with a high level of antigen testing are likely to miss a large number of positive cases, as the more reliable RT-PCR tests are down to 60% of the total tests. Bihar, especially in the run-up to the state elections, was the worst under-reporting state in India. The true number of Covid cases in Bihar was estimated to be 132% of the officially reported volume. Telangana and Gujarat have also grossly under-reported the pandemic in their states.
Active Covid-19 cases in India rose again on Tuesday, the third increase in four days. Fresh infections outnumbered recoveries by more than 5,500. This was the highest single-day increase in active cases since October 1, a sign that the pandemic could be on the rise again in India, which has remained second only to the US for weeks now.
Indian judiciary’s credibility down internationally
A new study on foreign court citations of Indian judgments – considered an index of the Indian justice system’s international credibility – looked at judgments in 43 countries to identify the frequency and pattern of citations of the Supreme Court of India’s judgments. Independent legal researcher Mitali Gupta has concluded that from 2014, there has been a fall in the number of times international judges cite Indian judgments in their own rulings. Gupta has studied two periods ― 2009-2014, when the United Progressive Alliance (UPA) was in office for its second term, and from 2014 to the present.
Sagacity, an attachment to rights, fierce independence and good writing are necessary ingredients for legal precedents that the world's courts would look up to. If the rest of the world is not so enamoured of Indian rulings, perhaps it is time the judiciary looked inwards.
Ambani sells, Adani bags
Google has paid Rs 33,737 crore for a 7.73% stake in Reliance Industries Ltd’s digital subsidiary, Jio Platforms Ltd, joining a list of global investors like Facebook. The transaction also marks the US technology giant’s biggest-ever investment in an Indian company. With this, Jio Platforms has raised a total of Rs 1.52 lakh crore by selling nearly 33% stake to 13 financial and strategic investors in just 11 weeks.
The Kerala state government has approached the Supreme Court against the Centre’s move to lease out Thiruvananthapuram International Airport to Adani Enterprises. The Kerala High Court had last month dismissed all petitions, including one by the state government, challenging the Centre’s decision to award Adani group the airport, one of the six for which it won a lease.
The Long Cable
Don’t bank on defaulters
MK Venu
India’s banking system has suffered multiple shocks over the past decade, largely caused by big corporate loan defaults and frauds. The economy is still reeling from the sheer scale of bank loan delinquencies and unresolved corporate fraud. Nearly Rs 8 lakh crore (over $100 billion) of bank loans, made mostly to corporates, have been written off over the past decade, and 80% of these happened in the last six years of the Modi government.
Therefore, it was particularly shocking that a central bank committee should recommend allowing the same large corporate houses, who are still to repay their bank loans, to enter banking activity via new licenses. The commonsensical question raised by many, including former RBI governor Raghuram Rajan and former deputy governor Viral Acharya, is: “How can a bank make good loans when it is owned by the borrower?” Logic need not come in the way of governments run by brute majority, but playing with an already fragile financial system is fraught with long-term risks to the economy. India is still largely a bank-funded economy and adventurous moves like giving bank licences to already highly leveraged corporate groups would be tantamount to throwing corporate governance to the winds.
The global ratings agency S&P and other central bankers have been quick to warn India on this score. It may not be so easy to play with the domestic financial sector, which is inextricably connected with the global financial system, and therefore requires alignment with basic norms practiced worldwide. In most robust financial systems, big corporate conglomerates are not given bank licenses for obvious reasons.
The Modi government worked very hard to bring in a bankruptcy reform law, which is often cited by the PM as his government’s key achievement. The basic idea of the Insolvency and Bankruptcy Code (IBC) was to empower banks to take over the assets of chronic corporate loan defaulters and for the first time, the law substantively shifted the balance of power to banks vis-a-vis delinquent corporate borrowers. Prior to this, there was no foolproof framework under which banks could quickly penalise defaulters.
Imagine the consequences to IBC reform if corporate borrowers start getting bank licenses. The proposal to let big corporates run banks also strengthens the claim made by former RBI Governor Urjit Patel, in his book released in July, that the bankruptcy code was gradually being compromised in the latter half of 2018 and early 2019, when the general elections were impending. Risk to the system is not just economic but also political, because big corporate groups make large contributions to election funding through opaque electoral bonds. So the move to let corporate groups own banks has serious implications for our political system and its institutional checks and balances, which have been seriously threatened in recent years.
The RBI panel also suggests that corporate groups already running non-banking finance companies (NBFCs) could get precedence. A finance company could be converted into a full-fledged bank, provided it has a big enough balance sheet. Bewilderingly, this proposal comes at a time when many big NBFCs such as DHFL (Dewan Housing Finance Corporation), Reliance Capital etc have been found by official forensic audits to be lending big amounts to related parties, which have become bad loans. NBFCs also borrow large sums from banks to lend on, and therefore act as retail distribution arms of banks. So the massive loan defaults faced by NBFCs automatically translate into loan defaults for banks. The most controversial case of bad loans-cum-fraud relates to DHFL, whose loan book of nearly Rs 1 lakh crore has been eroded by over 50%, according to one estimate. A KPMG audit found that nearly Rs 20,000 crore of DHFL loans were to related parties, for which the promoters are still under investigation by authorities.
Now, DHFL has been put up on a fire sale and the Adani Group is a serious bidder. Theoretically, Adani can buy DHFL for a song and then apply for it to be converted into a bank, if the new RBI panel proposal gains approval. Similarly, some time ago, eyebrows were raised when the State Bank of India struck a JV partnership with Reliance Jio for a digital payments bank. Experts naturally asked why SBI, with its vast resources, could not launch a payment bank on its own. Why did it need Jio? Such policies and transactions spell trouble for the future of the banking sector.
Reportedly
Ram Madhav runs distraction
Ladakh and the Line of Actual Control (between India and China) is a big cause of concern in India, especially after the loss of 20 soldiers in a deadly scuffle in the Galwan valley five months ago. Yet, the BJP-led NDA and its leaders seem to be agitated only about India’s western neighbour, Pakistan. Apart from Rajnath Singh, even the PM is yet to name China, which has made new ammunition storage bunkers in Doklam, Bhutan.
Now, the party’s former general secretary and RSS apparatchik Ram Madhav has gone on to draw attention to government-friendly news agency ANI’s report quoting a retired Pakistani Air Force officer. The officer has alleged that Indian National Security Advisor Ajit Doval is “using insurgents to distract Islamabad from Kashmir”. Madhav tweeted the story, without comment. That’s a clear nod of approval for the machismo implied by the story and it comes at a time when Islamabad says Doval’s ‘doctrine’ is fuelling terror inside Pakistan . Who is trying to distract whom, we wonder.
HuffPost exits India
The first round in India’s official war on digital media using new foreign investment restrictions has gone to the Modi government with HuffPost India shutting shop. The Indian outpost of the US digital media company had been around since 2014 and had established a small if feisty presence in an increasingly arid media landscape, first under the editorship of Sruthijith KK and then Aman Sethi. Last week, BuzzFeed announced the acquisition of HuffPost but kept the Indian edition out because the government’s new rules would have required it to cut its stake in the Indian company to 26% by October 2021. Instead of opting to do that, the new owners decided to orphan HuffPost India and allow it to die. HuffPost’s Brazil edition has also been killed, though for slightly different legal reasons. BuzzFeed had earlier licensed its Brazil site to a local company and was thus barred from running a competing brand in the same territory.
The new owners could have opted to run HuffPost India as an edition without the paraphernalia of an Indian company but may have decided not to so as to not antagonise the Modi government. BuzzFeed hopes to grow BuzzFeed India into a profit centre and believes its status as a “culture and entertainment property” will help it circumvent the new FDI rules.
This is as good a sign as any that BuzzFeed India staff will be under pressure to keep off current affairs in general, and controversy in particular. A sharp piece on, for example, the criminal case against Netflix for showing a Hindu-Muslim kiss could easily trigger a warning from the Information and Broadcasting ministry about the FDI rule. Ambiguity is the preferred policy for the Modi government. The more that media proprietors are left guessing about where sarkari red lines lie, the more they are likely to – voluntarily and excessively – trim their sails.
Deep Dive
Reading the Indus Valley
‘The Indus Script: Origins, Use and Disappearance’ ― this 34-page paper by JM Kenyover does not decipher the script, naturally, but organises available information on its use very well. Half a step beyond Asko Parpola, it opens a small window to one of the world’s most intriguing civilisations.
Gandhi to be temporarily evicted from Parliament
The majority is no longer moved by the Mahatma. On the contrary, the majority is determined to move the Mahatma. The new Central Vista is to be built in New Delhi, despite the financial and ecological costs, and Mahatma Gandhi’s signature statue outside the Sansad Bhawan porch must “make way for the construction of Parliament”. The 16-foot statue of Gandhi is one of five, including that of Bhimrao Ambedkar, at the existing Parliament complex that are likely to be relocated temporarily. Gandhi continues to watch over Parliament Square in London’s Westminster, though.
Prime number: 11%The percentage of gross loans likely to turn into non-performing loans in the Indian banking sector in the next 12-18 months, according to the S&P global ratings report ‘The Stress Fractures in Indian Financial Institutions’. On June 30, non-performing loans were 8% of gross loans extended.Back to zero
People in India will soon have to add a ‘0’ prefix for making calls from landlines to mobile phones. The telecom department has asked telecom firms to make necessary arrangements by January 1 to implement the new system. This change in the dialling pattern will generate 2,544 million additional numbers for mobile services to cater to future requirements.
Shaheen Bagh’s dadi and other Indian women of substance
Dadi Bilkis (82) figures in the list of BBC’s 100 women of note. She was part of a group of women “who peacefully protested against a controversial citizenship law. She became the face of a long-running protest at the capital’s Shaheen Bagh, the Muslim locality where the protests were held.” Other Indians on the list: Rapper Isaivani, athlete Manasi Joshi and climate activist Ridhima Pandey.
Op-Eds you don’t want to miss
Sanjay Hegde says that if the Supreme Court’s role as a protector of personal liberty is to mean anything at all, it must come to the aid of all citizens, equally.
India must employ more women to drive economic recovery, argues Rashi Sharma.
Harish Khare on the late Ahmed Patel, who came to personify a fundamental aspect of ‘Congress culture’: a working belief that there was no interest or idea that cannot be reconciled with the larger political good of the party, and by extension, with the national good.
Jawhar Sircar writes on hate on TV, what the law says on regulating it and how the Information and Broadcasting Ministry records all important TV programmes through its monitoring division.
“If conversion is used as a convenient means to marry a partner who belongs to a different faith, the primary offender here may well be state governments and bureaucracies. While bureaucracies make the procedures for solemnising marriages under the Special Marriage Act difficult for both interfaith and intrafaith couples, governments at times step in to further complicate the process.” Rama Srinivasan argues that it is not for the state to decide which relationships are acceptable and permissible.
Listen up
An Association for Democratic Reforms podcast analyses corporate donations to national parties in 2018-19. The BJP received the lion’s share of Rs 698.14 cr, which forms 94% of the total donations to the party above Rs 20,000 in FY 2018-19, followed by the Congress which declared a donation of Rs 127.602 cr from various corporate and business houses. There is no cap on corporate contributions to political parties, nor any requirement to share details of political contributions in profit and loss accounts. The previous limit of 7.5% was removed by amendments in 2017.
Watch Out
On ‘Exposing Caste Discrimination in the United States’, listen to Philip Martin’s multi-part series which explores how the caste system has followed many migrants from India and elsewhere in South Asia to the US. He is in conversation with Harvard scholar Suraj Yengde.
Big game hunting
A rare, sealed copy of the 1990 Nintendo game, Super Mario Bros 3, has broken all previous records for the highest price paid for a video game at an auction, when it sold for $156,000 at an auction. In Indian currency, that is more than Rs 1.15 crore.
Vignettes from Old India
That’s it for today. We’ll be back with you tomorrow, on a device near you. If The India Cable was forwarded to you by a friend (perhaps a common friend!) book your own copy by SUBSCRIBING HERE.