The PSB case is probably a window through which to look at the functioning of all state owned banks closely. Last month, in his May 1 speech while inaugurating Institute for Studies in Industrial Development, Manmohan Singh said: “I was struck recently by a comment in the media that most of the billionaires among India’s top business leaders operate in oligopolistic markets, and in sectors where the government has conferred special privileges on a few. This sounds like crony capitalism. Are we encouraging crony capitalism? Is this a necessary but transient phase in the development of modern capitalism in our country? Are we doing enough to protect consumers and small businesses from the consequences of crony capitalism?”

If the capitalist is the ugly face of crony capitalism, the system of appointing so-called independent directors, cronies if you please, in banks like PSB by political parties is the revolting base on which it stands. Together, they make merry with public money, and easily shift the blame on capitalism. Maybe this quiet introspection and questioning of crony capitalism should be addressed to independent directors and the parties that unleash them on public sector banks, who like scavengers are turning distressed assets that can help banks turn around, as PSB has been over the past two years, into mini fiefdoms to help their friends in high places secure and legitimise their loot.

The process is rather simple: instead of asking for an open auction, these ‘independent directors’ are forcing the settlement route onto the banks they’re supposed to be guardians of. A settlement, as the word indicates, is a compromise under which the bank generally loses, as it doesn’t get market rate for a property for instance. Often, it has to forego the interest that has compounded and not been paid for over a decade. The settlement route is one way; another example is filing petitions in court to delay proceedings. For PSB, the stakes run into thousands of crores of rupees.

... contd.