Is there a case for the defence forces to start their own Bank?
In a sad news today, the Syndicate Bank, which serves over sixty thousand defence pensioners, has declared a quarterly loss of 882 Crores. Their Chairman & managing director had earlier been arrested in a bribery scandal. Total loss declared by the Syndicate Bank, in this tranche of unpaid loans will be 2158 crores.
The State Bank of India serves nearly seven lakh pensioners and its assets are under stress forcing it to merge with its subsidiaries to create a facade of well-being when the money, in fact, has all but gone. Other Banks serving the Services and the Veterans/families are also in no better state. Tax-payers money will now be used for refinancing these Banks.
All our NPFs, the Serving, and the Veterans are using different Banks for their day to day requirements. Services have provided costly real estate to the Banks to run their Branches. Truthfully, the Services and all its personnel, past & present, are the net creditors of all the Banks. Statistics would prove that Servicemen would never default on their loans. They use the Banks to leave whatever extra they have. This trust of the depositors has been completely betrayed by the Banks who have created these humongous unpaid loans.
It’s here that a need arises for the Services to establish their own Bank. The personnel will never have to worry about their money getting embroiled into ‘the NPAs’ as the deposits would be under strict vigil & loans extended only to the legitimate borrowers. Retiring personnel will have their own in-house avenue for jobs after their early retirements and all the real estate of the Services would be utilized for the betterment of the people from the Services.
For bigger volumes and scales, the CAPFs can also be co-opted for such a venture.
The need is to apply for a licence and we have NPFs who can take a lead in this matter. The NPFs will then have full control of their money and would be able to devote resources for the betterment of its own personnel.
Imagine, every serviceman/woman getting the salary from the same bank, all pensioners getting their pensions from the same institution with no confusion in interpreting the rules, arrears being given correctly and in time, money being utilised correctly for the nation building, no unpaid loans and easier loans for the people from the services., centralised accounting, employment opportunities!!!
This post is on the Air Force Association Facebook blog on the 18th 0f May to elicit responses from the frustrated and impatient veterans (read Ex-Serviceman) in particular.
As being one I too felt the need to give vent to my lungs.It can be heard or read as : First thoughts: the need for a systemic soul-search !
To me, starting a new bank, all of your own with new guiding principles and in full command is a little about quixotic wind-milling battles ! Very simple and impressively idealistic at first glance .What scares is when I keep looking and then staring in disbelief at what I see in the unrecognisable mirror….
The Great Meltdown of 2007:The failure of Modern Neo-liberal Banking Systems
It may be recalled in the not too distant past,in response to the so-called limitations of measly returns and unimaginative spending, hidebound and very conservative criteria ( which are not in sync with modern neo-liberal economic paradigms that assure better growth and some attractive risk-linked returns), a so called win-win proposition for record and unprecedented returns met its Waterloo in 2007 with the economic meltdown in the First world. Hell broke loose and a chain reaction resulted. Millions of dollars of the people of these parts and even globally lost precious money. Banks went crashing and the tainted governments which are the flag bearers of such liberal and market based investment philosophy had all the tell-tale signs and symptoms of a horror story : relaxed controls, easy lending, over leveraging, incorrect pricing of risk, failure of financial innovation and understanding of its complexities etc. Not chastened enough with this calamity, the same governments went out of their way to bail out the offending banks or economies. This time again the money was of the public and the mystique was credited to the Fund-Raising Managers,entrepreneur bankers and Risk Analysts.Tragically, the people are easily short-changed being defenseless and always in a lose-lose situation .Well ,the faithful would say, that was sometime in the past.Best forgotten !
It may be appreciated that stringent laws against banking and investment of public funds in the realm of speculation like Real Estate, start ups,Shares and Primary or Secondary markets among other things in which sound fundamentals are in doubt was the norm in a centralized,welfare-oriented command economy planning perspectives and public sector driven politics.All said,these old-fashioned economic methods and tools ensured India to weather reasonably the chaotic aftermath of this worldwide phenomenon called European Meltdown crisis not seen since the Great Depression of the 1930’s.
Our memories need to be revitalized .We need to learn from our strengths and recent histories. More so when we are not getting any younger and precious monies do not multiply by smart talks of the sharks of marketing finance and the idioms and vocabularies of a Wharton, Cornell or even Harvard alumni.
The Corporate-political-industrial-mafia-bureaucratic Nexus
Recently we were informed of thousands of crores loaned out to some of the world’s finest corporate houses of India. They all are not to be returned instead to be regularized, under-written or waived off as bad debts or as non-performing assets. Interestingly, there are many of our scheduled banks which had made investments of public monies apparently to reap higher dividends. This huge loss impacts disastrously the military and society in general.This then is also a national question and cannot be de-linked.
Since the nineties of the previous century, the Indian government under Rao had started making momentous changes in our public sector oriented policies to respond to market globalization trends. In this, Manmohan Singh the then Planning boss with Montek Singh Ahluwalia in tow had championed such loosening of regulatory controls and stifling governmental restrictions. This was to usher in double digit growth ,rising prosperity and all round inclusive development. International Monetary Fund(IMF) and World Bank had applauded these revolutionary changes with suitable appointments, gifts and rewards. These were sadly and very mistakenly believed as Nobel Prizes of Economics. It has taken two decades for the bubble to burst.Contrary to widely held understandings,it was more than fortuitous that the coalition governments led by the Indian National Congress did not have the heart or legs to get on with it.Now,the present regime is trying to impose such economic ideas with more purpose and vigor for there is not much difference in the economic policies of a Congress and Bhartiya Janata Party(BJP)
How the Banks (Scheduled ones at that) get to invest money or provide loans,what are the regulatory safeguards,the persons empowered to make such vital decisions,the levels of autonomy or governmental interference,the beneficiaries and their linkages,levels of transparency,accountability and public knowledge of the aftermath of the loss or embezzlement or plain swindle are questions to be asked and answers thereto would then perhaps form the basis of another venture howsoever,well intentioned or noble minded it might appear to be.For a start are we to understand then, that such investments or loan giving were made with government consent(read sugar coated or blatant aggressive coercion) and/or RBI approvals .
The myth of Financial Independence or Freedom
Is the military then in their naiveté sufficiently prudent or financially confident to believe that they have the necessary operational freedom and flexibility in making their own investments and taking control of them ? Are they convinced that the banking industry which has considerable skills of its own ,enviable vintage and domain knowledge to be not equipped or qualified to understand its responsibilities? Is it then being wise to breast beat that we are special and capable enough to remedy all the anomalies,subservient and obligated to none despite being privy to shady histories and systemic malfunctions ?Or are we reinventing the wheel and fooling ourselves without even looking at the deeper issues of political control ,venal nexuses and anti-people economic philosophies in vogue detrimental to the greater good or common happiness ?
The Air Force:How good is its Experience and Track record
We , in the military need to look, think and understand out of our skins and traditional mind sets. Contrary to impulse and bravado,to imagine not to be a part of the same system that governs and control all lives is to be insulting our own native intelligences.In fact, to believe that we as a military organisation based on a rich tradition of honesty and integrity to be enough to foray beyond our areas of traditional strengths would be ambitious, but under prepared in demonstrated performance, knowledge and experience.
In the past or even now path breaking schemes based on non-traditional and challenging ideas have been adopted to support or encourage not-for-profit ventures like horticulture farming, grocery shops,coaching centres,dancing classes,beauty parlours,self-reliant canteens,bakeries,dry cleaners funded and backed up by regimental or non-public funds.The Women’s Welfare Initiatives to empower young women and wives in distant locations and use their capacities to bring up not so fortunate segments of society,help and facilitate local integration with local civilians have to be seen in similar light.Impressive achievements have been noticed in the creation,planning and running of Schools in urban and rural based stations.The Army has shown skills in management of technical and medical institutions. In the real estate and construction activities Army in particular has been successful and set high standards.These have been very fine ideas but very limited in scale for developing business expertise or entrepreneurial acumen.As a caveat it would be most instructive however to remember:these have not all been success stories either and the mismanaged accounts or finance books quietly backed by hedge funding from the leadership have not exactly covered the military with glory.
Today in the Indian Air Force the core accounting skills or expertise are those that of MCom/BCom trained officers and men. Chartered/Cost Accountants are an exception.Advanced Financial Skills are not honed, upgraded or developed.It takes courage and vision to concede that such Non-technical officers and men are very low in the pecking order with limited promotions or motivation.In fact senior officers would easily introduce these lesser mortals to be innocent of combat knowledge and are there because well someone has to the dirty job of calculating and then distributing salaries. Such being are recruiting methodologies or qualifications required OROP (One Rank One Pension) was not surprisingly an expose` of poor financial knowledge or strategies when pitted against the specialist,professional and not-so-friendly bureaucrats from the Administrative, Accounts or Audit streams.To cap it all,the large Indian Army is beholden to the rank corrupt civilian audits and Accounts Branch having no Branch or department of their own. OROP in that sense should be an admission of failure right at the top of the leadership for its incapacity to realise some emerging basics for a strong and complex organisation at the outset , post-independence and progressive dilution subsequently, of its importance .Finance the single most important facet of any organisation or bureaucracy was left to the lowly clerks widely believed to be non-combatants.As a military organisation we were subject and captive to a pre- colonial mind set and ideology at best and an ancient or feudal doctrine at worst.To be just a well-oiled fighting machine deployed to protect the borders doctrinally could not support the developmental demands of a growing nation with its ever increasing complexities or demands.The macho but myopic military was caught with its weapons gutted thus in the OROP maelstorm: tortuously exposed and in tatters trying to fight a lost battle if there was one ! Hubris is so often closely related to the fatal arrogance of ignorance !
Unless, of course, the Armed Forces together agree not to engage in inter-service competition and gamesmanship and instead decide to see the root and genesis of the problem as a common one and look to devising a forward path born not just on an emotional solidarity platform but as a genuine professional idea that has come late though long overdue .The driving interests should be for the broad-based modernisation and empowerment of the military in particular and the ultimate benefit -a combined accrual, to the nation.The military has to see the civil world as an essential resource option to be co-opted for programme implementation and to remain sufficiently relevant within the developing world of new ideas . With the coming of digital technology and the addition of the cyberworld NORAD and the Pentagon have moved on to welcome the disdainful community of nerds,smoke-addicted,bespectacled,ear-muffed,slinky and slouched youngsters to fill in a requirement of intelligences, hitherto, found wanting with the uniformed soldier.But in order to integrate and yet,be stamped with the military edge they need to equip themselves with an improved training curriculum and revamp existing promotional policies so as to give adequate recognition to those that perform such tasks.The leaderships have to recognise and welcome its importance and not to be in an indecent hurry to appropriate newly created posts for themselves, as of divine right.
To ardently and wishfully believe many jobs would result mostly for the veterans, generation of increased interests and business through sound investments, unifying ownership and taking control of its capital is therefore foolhardy.In view of our limited skills in the finance sector therefore, be rest assured to becoming a redundant army of clerks controlled and run by another civilian bureaucracy.We would be sweet talked once again for some after-retirement positions and assignments at home and abroad,creation of additional vacancies and ranks,travels abroad,scammy defence deals etc.
The modern day military needs to balance the mostly contending needs of a threatened, yet competitive and already superior bureaucracy with that of the political masters governed by the dictates of vote banks and frightfully flexible ideologies. Frequently,the military is subjected to the compulsory silences of the Official Secrets Act and kept out of the pristine doors of real power as custodian of its turbulent borders.The realpolitik of routine exposure in exercise of aid to civil power in disaster management of forest fires, riots,internal insurgencies, floods and earthquakes both within and across countries however exposes the military to live and suffer the indignities of overuse and public criticism.It needs to be underlined that successes or failures in the educational or real estate sectors is an interface not just with civilians but of transactions that are also not necessarily clear cut and rule bound.It brings both the serving and veteran to a new ethos and value system which at best culls for the smart and clever.Business is about profit making and money is God.Therein lies the Frankenstein and the worries of compromise or potential conflict.
Out of all the fears imagined or real,the aspirations ideal,realistic or exciting comes out the need for caution.Is the military prepared to re-invent itself to claim its rightful place in a constitutional democracy by redefining its philosophy both in war and peace in a post-colonial world?Will it decide to see the need to integrate itself with the larger civilian masses and see the wisdom in gainfully utilising their knowledge,experience and skill sets while developing their own domains?Will the bureaucrats and politicians be comfortable to revisit their own exclusivities and grant honourable participation to the military beyond the normal accustomed boundaries without raising the spectre of a military threat?Somewhere in its answers shall lie the future of non-traditional endeavors of the military.Until then, Fauji Banking would be as surreal as Sachin Tendulkar commanding a Fighter Squadron.
Where did the well earned money get lost in the Bank anyways? That is the question.Some unconnected clues have been deliberately inserted by me for discovering the design of the macabre. When we import weapons and machines of war the bureaucracy and not the military makes the final choices and deals.. When we get armed we need to know who our enemies are. Do we need the weapons against such enemies and/or are they part of the government brief as a result of result of deep seated military-politico analysis which shall serve the interests of the nation?Are the drones and policing the South China seas part of our national military strategy or as influenced by new found friends who want us to fight their wars ? For when military contracts and purchases are made the government invests much needed public finances in our local manufacturers, brokers or industrialists or corporate houses?Or are these crony capitalists hiving off precious monies on created or imagined terror doctrines keeping the military happy and going laughing to the bank in the end?Interestingly Reliance, the Adanis and others who have little or no Defence manufacturing experience have won big contracts despite being defaulters of government loans. All such perceptions cost money and they come from government investments which come out of the public pockets. Most of it therefore gets lost without creating more money. We fight wars and therein we are aligned with everyone else. To perceive otherwise is to be either unintentionally ignorant or being greasy by design.
.It is only to the State represented by the government of the day the military answers to constitutionally :never to individual bureaucrats or politicians or political parties or their brokers or lobby groups. Albeit,this understanding and policy implementation has a tenuous navigability which calls for military statesmanship of a high order to steer clear of the twin pitfalls of brash hot headedness or servile supplication.
Sorting Out the Whodunit !
We have to see the causal interconnections from the very slight to the huge.We are to bring order out of the chaos of perceptions as the food chain of governmental sectors and departments: a humongous monolith is dramatically linked. The deceptive threads of growth, their basis and many intersections need to be puzzled out like a big whodunit if the military does not wish to be found short while traversing newer and unfamiliar minefields . We are no longer lost atoms in an unfriendly world. These are newer days asking fresh questions to the ordinary military world. We need to debate economic freedoms in the time of neo-liberal governments at a holistic level and then map our financial strategies within the degree and limits to independence imposed. Reactive policies are at best good in short time scenarios. More returns and interests from Real Estate or other area of speculative trading and business seems seductive at best and calamitous at worst. My suggestion is from the above evidences it is infinitely clear that there is no such thing of assured returns in a market-driven society where profit-making and anything-goes-value system prevails. It is an oligarchy of power and authority exercised through the rich and powerful of the industrial-bureaucrat-political-mafia combine.As to where the military fits in to this free-for-all democratic regime is anybody’s guess during these changing times .
So tread with caution while the nudges and winks from shady quarters entice!