Lessons not learned: India's scams amount to enemy action
The government’s claim each time a scam
has taken place is that the law will take its own course. There is invariably a
lot of sound and fury – signifying nothing
Once is happenstance. Twice is a coincidence. Three times is an
enemy action.
-- James Bond (Ian Fleming'snovel Goldfinger)
The markets are in a
tizzy. Believers in a concept called India are dismayed. The latest
scams surrounding Punjab National Bank (PNB) and ICICI Bank have
actually shaken the faith of many who believed that India was beginning to
cleanse itself of the rot that had corroded the economy in the past.
The government’s claim
each time a scam has taken place is that the law will take its own
course. There is invariably a lot of sound and fury – signifying nothing.
Almost all the
culprits go scot-free. And as a hoarding put up near Churchgate around
2005 clearly showed – India remains a land of scams. They become bigger
with each passing year. And the law is never allowed to take its course.
When it involves
government officers or ministers, permission to investigate is not given by the
government. When it comes to judges, impeachment proceedings are not
embarked upon. In the Harshad Mehta case, impeachment proceedings were
embarked upon by the government. But on the appointed day, most politicians
stayed away from Parliament. That made the proceedings infructuous. In the case
of another chief justice of the apex court, where there were serious charges of
amassing assets beyond known sources of income, the enquiries were suddenly
silenced.
Consider one more
modus operandi that appears to be common to three of the biggest scams in the
recent past.
In the Harshad Mehta
case, money was illegitimately obtained through the use of fake BRs (Bankers
Receipts). These were receipts given by banks when a treasury bill was
deposited with a bank to borrow money against the financial instrument.
What was missing as an
online database that could allow banks to know if the instrument had been
pledged with another bank, or whether the BR existed at all. Had a centralised
database been made available, no fake BR could have found its way to any bank,
and no BR could have been presented twice to different banks.
Hindsight is supposed
to make one wiser. Yes!
But fast forward to
five years ago, and you have the National Spot Exchange (NSEL) scam. Warehouse
receipts were issued for grain that wasn’t even there. All that was
needed was a centralised database, which could have let everyone know how much
of grain was actually stored in each warehouse. The database would have
told one if a particular quantity of grain had been sold, or pledged, or if the
warehouse receipt itself had been mortgaged. Once again the centralised
database for universal access was missing. As James Bond would have said, Maybe
twice is coincidence.
Both scams took place
in the age of the internet where online access to centralised web-based
databases is quite a simple process. Yet nobody bothered!
Then take the case of
the LoUs (letters of understanding). The Reserve Bank of India (RBI) had
made it clear that LoUs could not be used for advancing money. Guidance
ignored. All LoUs were to be backed by a margin of over 100% of the amount
mentioned. Once again, this rule was ignored. But more serious was the
fact that the same LoUs were pledged more than once and fake LoUs began doing
the rounds just like fake BRs did almost two decades ago.
Now either Indian
bureaucrats don’t learn from mistakes, or are trained to look the other way. In
any professionally run organisation, when a mistake happens once, it is a
learning curve. A second recurrence is a case for the person being put on
the watchlist. A third repetition calls for dismissal.
The government hasn’t
dismissed anyone. The CBI hasn’t filed charge-sheets against any officer
for ignoring this basic rule. Even linking the SWIFT communication
vehicle to the Central Banking System was ignored. And Infosys, which
provided the software, was supposed to have covered all loopholes.
Shouldn’t the system engineer who certifies the soundness of the platform have
alerted people to the dangers of the SWIFT not being linked to the CBS?
And why was the RBI silent about the absence of a central database of LoUs or
LCs or any other instrument that could have been pledged?
This was the third
time a central database was being ignored. Doesn’t this not warrant
classification as “enemy” action?
Whose enemy? Enemy of
the people, obviously. Or have various authorities, over the years, slept with
the enemy?
