ICICI-Videocon: Arvind Gupta tells National Herald why he blew the whistle

Arvind Gupta says he cannot stand injustice. He had raised the flag over ICICI Bank’s loan to Videocon in 2016, even before the bank declared the account as Non-Performing Asset in 2017. A shareholder of both Videocon and ICICI Bank, he admits to being an ‘insider’ and alleges that the unholy nexus between bankers, the ruling party and the corporate sector has created a crisis in the banking sector. Private banks should actually be nationalised, he says in response to a question seeking his reaction to demands for privatising public sector banks. Excerpts from the conversation Bhasha Singh had with him for National Herald:

Why did it take two years for agencies to take note of your letters?

That is how the system works. Had they acted promptly, they could possibly have ensured that the NPAs are substantially less than what they are now.

Could this ICICI-Videocon loan and declaring it as NPA be a stray, isolated incident?

NPAs, I believe, are a huge scam and is a major threat to our banking system. I fear the tipping point is close and a national banking crisis is about to overtake us when faith of shareholders, depositors, etc. is shaken. It is a dangerous sign. The Prime Minister claims his government has zero tolerance to corruption but on the ground there is not much evidence of it. It is time their action starts speaking louder than their words.

How does this nexus work?

Loans rarely turn bad because the economy is passing through a poor phase. Loans turn bad either because of poor management or because bankers, bureaucrats and borrowers are colluding with each other. It remains to be seen how much of the NPAs are due to bad management and how much due to corruption. The poor do not get loans in any case. The rich get it easily though because they know people in positions to sanction such loans. A consortium of banks join hands to collectively provide huge loans so that fingers are not pointed at one bank. It’s the same mechanism that one sees in the ICICI-Videocon loan controversy. The system now stands exposed.

Do you intend to pursue this?

There is a limit beyond which an individual cannot proceed. I have analysed what is available in the public domain. It is very simple, really. Anyone could have blown the whistle. All that you need to know is how to smell the rat.

If it were so simple for an individual like you to detect, why did agencies and regulators fail to spot it?

As I said before, without the connivance of bankers and the players, no foul play can happen. If the referee is vigilant, how can you play dirty? That is why I have used the term dirty banking. Just because it is public money, ordinary shareholders’ money, you feel you can play with it and do what you like? That is not acceptable.

But the ICICI Board and the bank’s chairman have given a clean chit to Chanda Kochhar and have given a public statement saying there was no irregularity…

Do you expect them to admit that they are guilty of something? Let there be an independent inquiry, independent audit, rather a forensic audit by people who are competent, then they will give the certificate. Nobody has asked any company or bank to certify themselves.

What are the core issues touched by your expose?

The basic issue is centralisation of power. So, there should be decentralisation of power. What is lacking is transparency and accountability at all stages and levels.

What should the CBI and other agencies be looking for?

Investigating agencies should first probe the source of funding of Videocon Group’s investment in NuPower, the company of Deepak Kochhar; if they find that the money came from Indian banks, it would mean siphoning off funds.

What is ICICI Bank exposed to?

ICICI Bank’s American Depository Receipt (ADR) trades on New York Stock Exchange. There can be class action suits initiated in the US and the bank may have to end up paying large sums.

How do you react to increasing demands for privatisation of public sector banks in view of your allegation against the largest private sector bank?

I find the demand not just stupid but diversionary as well. When banks were nationalised, the idea was to save resources and distribute capital more equitably. But now that the economic philosophy favours an open market, everything public must be privatised. Is everything that is private good? Market economy has failed everywhere. That is because in a market economy, regulators must be strong, smart and sharp. If regulators sleep on complaints for two years, the market economy cannot work. The government has asked reserve Bank of India to initiate insolvency proceedings against several defaulting companies. This process of involving a tribunal and a court could be a design for delaying the recovery process. The government keeps saying there is a ₹10-12 lakh crore NPA problem but does not say how much can be recovered and what were pledged as collateral security. We cannot afford to let the government speak of market recapitalisation and bail out the banks and corporate bodies by giving them tax payers’ money. Why should the tax payer pay for their misdeeds and get taxed even more?

Do you smell a rat in Videocon raising its donation to the BJP from a paltry ₹5 lakh to a more substantial ₹10 crore?

Clearly the government does not want the people to know who are funding the political parties. When people donate to temples, often people keep it a secret, call it ‘Gupt Daan’ while others want their names engraved on the walls. But corporate donations are different. It is shareholders’ money. Therefore, it is wrong to keep the donation by corporate bodies secret. They should be open and transparent.

Some say your complaint has added to the confusion and eroded the credibility of institutions…

Be it SEBI, be it any other regulatory body, I find they are more into marketing themselves. They don’t follow normal rules and regulations. They don’t even acknowledge, they don’t even let you know whether they received your mail. They don’t even send automated replies. They only respond if issues like PNB-Nirav Modi deal or the ICICI-Videocon deal blow up.