Mr. Vivek Kaul, distinguished author and columnist delivered a talk on “The Big Bad World of Bad Money” at the 10th WiseViews Interactive webinar series conducted by the ICFAI for the benefit of working professionals, Research Scholars and Students across the country.
In his speech Mr Vivek Kaul outlined how good money lent by banks turned into non- performing assets or what he calls bad money. He said “India saw a peak of 9+ % peak growth in the period 2002- 05. This led to high expectations that India would also follow a China like story of prolonged growth. Many businesses planned investments based on this expectation. Banks were more than willing to lend. The 2008 Global Economic crisis did not stop them from lending. The expectations of consumption for which this capacity was planned did not turn true. Meanwhile interest rates rose after 2008-09, this led to default of loans or NPAs as we know.”
Mr Kaul opined “In the initial days even after 2014 the media and the public did not relate this issue as bad loans. The case of Vijay Mallya, Nirav Modi and the likes gave life and popularity to the NPA saga though in reality they were not amongst the largest defaulters.”
Mr Kaul explained people have paid a heavy price in terms of:
1.Money which could be used for better purposes is being used to fund banks on account of bad money.
2.The banking sector is becoming privatized by default with public sector banks losing market share to the private sector significantly.
3. Banks are not able to pay interest rates in comparison to inflation which impacts the common man who stil depends on bank deposits as a primary means of saving. For retired people this reduces income and they are forced to reduce consumption.
Mr Kaul further said “After 2014, recovery of loan processes began through the Indian Bankruptcy Code. In some sectors this has yielded better results such as the steel sector. In some they did not and a lot of money was lost through significant haircuts. In some cases assets had to be liquidated. Bankers have systems in place to assess risk as well as recover money, this was demonstrated in the retail loan sector where NPAs were only at 2%, well below danger levels. The criticality brought out was that in the case of big businesses while bankers had the knowledge, they did not wield power. Decisions were influenced by those in high places of power who did not have adequate knowledge.
Mr Kaul suggested that bankers must be allowed to do their job and then made accountable. While concluding his talk, Mr. Kaul held a dim view of the accountability in the crypto currency systems as opposed to paper money systems where the state is accountable. He also highlighted the volatility of such systems.
The webinar was moderated by Prof. R Prasad, Director - Academic Wing, ICFAI Group and Prof. Sudhakar Rao, Director – Branding, ICFAI Group.
About 250 participants including entrepreneurs, Research Scholars, prospective students from various parts of the country registered in advance and participated in the event.
About Mr Vivek Kaul: Mr Vivek Kaul is a widely published writer on economics and finance, who has been quoted in The Economist, Wall Street Journal and the BBC. He is also the author of five books. His latest book, Bad Money – Inside the NPA Mess and How It Threatens the Indian Banking System, published in June 2020 by HarperCollins, is an Amazon bestseller. In the past, he has been invited to talk to the students of, IIM Ahmedabad, IIM Bangalore,IIM Kozhikode, IIM Indore, IIM Ranchi, IIM Visakhapatnam, TISS Hyderabad and Symbiosis University.
Mr Kaul’s writing on economic and financial issues has appeared in leading Indian publications. Currently, he is a regular columnist for the Mint and the Deccan Herald, among other publications. Mr Kaul lives in Mumbai.
