L’affaire PNB-Nirav Modi is embedded with several sub-texts: the most interesting one emerging is the greater push towards privatisation of PSBs. It was Chief Economic Adviser Arvind Subramanian who first gave the clarion call, followed by a couple of industry bodies — Assocham and FICCI — throwing their collective weights behind this idea. The argument is that greater private or even absolute private control in PSBs will result in greater accountability and transparency in operations, preventing such scams from occurring in future.
But the pro-privatisation argument is predicated on the neat ‘government is bad, private is good’ binary, which is so loved by our middle classes and the media. Before we start raising more paeans to privatisation, a dip into recent history would be useful. Corporate India’s biggest scam involved a private sector company, Satyam Computers, a top software exporter in the country’s much storied IT revolution, and not a much derided PSU. This company had some eminent corporate honchos as independent directors on its board, including a professor from Harvard Business School, and some of the biggest names from the accounting profession auditing its books. That the government moved swiftly to resolve the issue shows how keen the powers-that-be were to prevent the scandal from giving India Inc a bad name.
Also read: The PNB scam: India’s Lehman Brothers moment?
Just a few months before the Satyam scandal surfaced, the world was shaken by the Lehman Brothers’ collapse and the subprime mortgage crisis in the US. None of the banks involved in this mess, which literally brought the global financial system to its knees, was under public — government — control. Ironically it was the US government that had to ‘bail out’ these privately-owned banks by pumping money into them and ensuring they didn’t keel over.
Some time back when eminent social scientist Ashis Nandy in an interview was asked about his views on crony capitalism, his cheeky retort was: “Is there any other kind?” Given that Corporate India hasn’t exactly set a ‘gold standard’ in business ethics, now is probably a good time to start.