INDIA’S banking system, which was robust enough to withstand the financial crisis of 2008, is facing yet another crisis today. The banks, particularly the public sector ones, are burdened with huge amounts of non-performing assets (NPAs), which are threatening the viability of the banking sector.

In the last three years, under BJP rule at the centre, the NPAs of the banks have tripled - from Rs 2.3 lakh crores to Rs 6.8 lakh crores. Currently, the NPAs of public sector banks stand as high as 11 per cent of their total advances.

Non-repayment of loans by some of India’s biggest corporate houses is the major cause of this huge accumulation of NPAs. According to the chairman of parliamentary accounts committee, KV Thomas, a handful of big corporate houses account for 70 per cent of the NPAs of the banks.

Finance Minister Arun Jaitly, tried to absolve himself and his government of all the blame, claiming that the NPAs are a legacy problem. According to him, the loans that were given during the UPA government have turned bad and are accumulating as NPAs today.

While there is no doubt that UPA government was generous with its favours to the corporates, the BJP government has been outdoing its predecessor. If the UPA government compelled the public sector banks to dole out loans worth lakhs of crores to a handful of corporates, the BJP government is helping the same corporates in continuing to default on the repayments – with the aid of loan refinancing and restructuring schemes introduced by the Reserve Bank.

In the last three years of Modi government, public sector banks have been pressured to restructure bad loans (under various schemes of RBI) worth Rs 3.5 lakh crores belonging to the corporate houses, which have been treating banks as their personal piggy banks. These restructuring deals simply meant that the companies get new loans to pay off their old loans, which they have already defaulted on. These schemes also involve changing the terms of payments completely in favour of the defaulting corporates and to the detriment of the banks’ interests

The infamous case of how Vijay Mallya defrauded the public sector banks, is all too well known. Less publicised are those of Modi’s own crony capitalists, whose bad loans to the public sector banks are of even higher order. It is estimated that companies controlled by Adani, on whose airplanes Mr Modi takes occasional rides, owe a debt of Rs 72,000 crores to the banking system, much of which is to the public sector banks.

After BJP formed government at the centre, two power companies controlled by Adani’s firms have been extended loan refinance worth Rs 15,000 crore by the public sector banks. This was done when both the companies’ earnings – before tax – were not even enough to cover the interest cost on the loans they have taken. In this sweetheart deal, the previous defaulted loans were replaced with new loans and loan repayment date was extended by one more decade. Additionally, a moratorium on interest payments was given for a considerable period, meaning that in this period these two firms need not pay even the interest amount.

Similarly, Reliance Gas Transport Infrastructure Ltd (RGTIL), a corporate entity controlled by Mukesh Ambani, was given a generous treatment by public sector banks after Modi’s ascent to power at the centre. RGTIL was given a loan refinance of Rs 4,500 crores and an extension of payment period by more than a decade.

According to finance minister Arun Jaitly, most of the NPAs and bad loans are due to projects in power, infrastructure, mining and steel sectors – which are owned by the large corporates like Reliance, Adani and Vedanta. Let us not forget, these are the same companies (remember Vedanta’s land grab in Orissa), whose factories and plants were set up by grabbing thousands of acres of land belonging to famers and tribals.

These billionaire promoters and owners of the companies should have been compelled to transfer the shares (equity) in these companies, to the public sector banks, in lieu of the unpaid loans. Or, they should have been made to inject fresh capital into the defaulting companies. Refinancing of the loans, extension of payment schedules and moratoriums on interest payments – without placing any responsibility on those who control the companies are bound to bring even heavier losses to the banks in the coming days.

The government seems to think that Mukesh Ambani, with net worth of more than Rs 1.5 lakh crores needs assistance in paying back the loans of his companies, while the farmers of this country are supposed to swallow the bitter pill – either kill themselves or sell their lands, if they cannot repay their loans after severe droughts and crop losses.

Desperate after years of drought, farmers from Tamil Nadu and elsewhere have been agitating for months for loan waivers. Their appeals to the central government have fallen on deaf ears. Modi government steadfastly refused to provide any assistance to the debt ridden farmers. Are the farmer’s making ridiculous demands? Consider this – The entire amount of crop loans in India is worth Rs 75,000 crore, while Adani firms alone owe Rs 72,000 crores to the banking system. Adani gets a generous restructuring on the defaulted loans, while the farmers get tough love.

Farmers who could not pay back their loans are named and shamed. List of their names are displayed in public. Their possessions are auctioned off without any compunction. Then, what stops the government from instructing the banks to mete out the same treatment to the billionaire defaulters? After all, the Supreme Court has already mandated that list of defaulters be made public.

In more ways than one, it is the public money that is being squandered in the NPA mess. The banks are owned by the government and hence belong to the public. The deposits on the basis of which loans are advanced also belong to the public. Nearly 60 per cent of the deposits with banks are made by households, while another 15 per cent of the deposits are made by the government sector. Effectively, the losses of the banks are also the losses of the public, both as depositors and as owners.

While the corporates that rob the public of their money are being given a free pass, Modi’s pets in RBI are baying for the blood of public sector banks. Recently, RBI’s deputy chairman Viral Aacharya suggested that the solution to the NPA crisis is re-privatisation of some of the public sector banks and some divestment of government’s stake in others, in favour of private players. RBI Chairman, Urjit Patel was not far behind, with suggestion that small banks afflicted with NPA problems should be allowed to perish naturally. The RBI satraps seem to be forgetting that it is the bulwark of public sector banks that protected India’s financial system from the crisis of 2008.

After all, who has the money to buy banks in India – the same set of billionaires and the top industrial houses? These are the same companies, which owe, Rs 5 lakh crores to India’s ailing public sector banks, much of which are bad assets. Clearly it is not enough, that Indian corporates have defrauded banks of the public money – in return for their great deeds, they are now being offered the ownership of these banks.

The suggestion that troubled public sector banks be sold to these private players, who to begin with are the cause of the banks’ troubles, is mind boggling and smacks of crony capitalism that afflicts the present government and its top administration.

Concession after concession given to corporates is what marks Modi’s three years at the helm and there is no indication of change in course away from this. Modi is making sure that those whose money purses have brought him power are going to stay safe and sound from the consequences of their own financial and business follies. Now that he has passed a law allowing corporates to make anonymous donations to political parties, grateful corporates will no doubt be flooding him with gratitude funds for his never ending election campaigns.