TAMAL BANDYOPADHYAY FROM LEHMAN TO DEMONETIZATION A Decade of Disruptions, Reforms and Misadventures Foreword by K.V. Kamath PENGUIN BOOKS Contents Foreword Introduction PART I: A TURBULENT DECADE The Lehman Collapse Days HOW A YOUNG FINANCE PROFESSIONAL’S WORLD COLLAPSED HOW THE RBI FENCED INDIAN BANKS FROM THE TURMOIL LIQUIDITY CRISIS: WHERE HAS ALL THE MONEY GONE? A DESPERATE RBI NEEDS TO BE CREATIVE IN CRISIS MANAGEMENT IS THE CENTRAL BANK AT RISK OF LOSING ITS CLOTHES? WE SHOULD SEND FLOWERS TO INDIAN BANKERS Microfinance: To Hell and Back FINANCIAL INCLUSION AND MY DRIVER, RAJU MFIS NEED TO ALTER BUSINESS MODEL HOW CAN WE SAVE THE MICROFINANCE INDUSTRY WE NEED MFIS TILL BANKS GET READY TO SERVE THE POOR MICROFINANCE: TO HELL AND BACK THE LIFE, DEATH AND RESURRECTION OF INDIAN MICROFINANCE INDIAN MICROFINANCE INSTITUTIONS HAVE JUST BUSTED A MYTH THE NEW HOTSPOTS OF INDIAN MICROFINANCE Public-sector Banks: Fall from Grace THE SAAS–BAHU SYNDROME IN INDIAN BANKING GOVERNMENT, THE BIGGEST RISK FACTOR FOR PUBLIC-SECTOR BANKS ARE PSU BANK HEADS FEUDAL LORDS? HOW THE GOVERNMENT CHOOSES PSU BANK CEOS WHY WE NEED PSU BANK REFORMS GOVERNMENT TO GAIN THE MOST FROM PSU BANK REFORMS BANKING WITH A BROOM, PSU STYLE Banking Reforms or Lack of It BANKS FOR BREAKFAST, LUNCH, DINNER WHY THE RBI SHOULD KILL THE BANK RATE BANK BPLR: MAY IT REST IN PEACE LIFE AFTER SAVINGS BANK DEREGULATION BHARATIYA MAHILA BANK: UPA’S RS 10-BILLION MISADVENTURE DO WE NEED MUDRA BANK? THE GREAT INDIAN FINANCIAL INCLUSION CIRCUS A PAPER TIGER CALLED BANKS BOARD BUREAU CAN ONLY LOVE FOR OUR POSTMAN ENSURE SUCCESS FOR INDIA POST PAYMENTS BANK? CHANGE IS IN THE AIR FOR INDIAN BANKING DO WE NEED A RELIANCE JIO IN INDIAN BANKING? Bad, Bad, Bad Loans LOAN RECAST: THE RESERVE BANK’S BIGGEST GAMBLE ARE INDIAN BANKS HEADING FOR A CRISIS? ARE BANKS IN A DENIAL MODE? HOW MANY BANKS ARE SWIMMING NAKED? BANKS ARE STRESSED: WHAT DO WE DO? FOUR STATE-OWNED BANKS TO WATCH OUT FOR NPA ORDINANCE: THE LAST ACT OF BAD LOAN RESOLUTION? (PART I) NPA ORDINANCE: THE LAST ACT OF BAD LOAN RESOLUTION? (PART II) FINALLY, THE RBI CRACKS THE DA VINCI CODE OF INDIAN BANKING LIFE AFTER KINGFISHER FOR INDIAN BANKS WHAT’S NEXT, MR VIJAY MALLYA? AMTEK AUTO: BANKS TO BLAME FOR BLOATED DEBT (PART I) BANKS AND THE BLOATED DEBT OF AMTEK AUTO (PART II) Corruption: The Soft Underbelly of Indian Banking THE BANKER–BROKER NEXUS THE MURKY WORLD OF ‘SUITCASE BANKING’ HOW TO DEAL WITH CORRUPT BOSSES OF STATE-OWNED BANKS (PART I) HOW TO DEAL WITH CORRUPT BOSSES OF STATE-OWNED BANKS (PART II) HOW CORRUPT ARE OUR BANKERS? The Conflict between the RBI and the Finance Ministry THE RESERVE BANK OF INDIA NEEDS NEW CLOTHES SHOULD FINMIN BE THE SUPER REGULATOR? THE UNTOLD STORY BEHIND THE QUICK-FIX ORDINANCE EMPEROR, LOOK AT YOUR OWN CLOTHES FINANCE MINISTRY, RESERVE BANK AND AUTONOMY THE NEW PHASE OF THE RBI–FINANCE MINISTRY CONFLICT Demonetization: A Boon or a Bane? THE WHYS AND HOWS OF DEMONETIZATION AN UPHILL ROAD FOR MFIS FIFTY DAYS IN THE LIFE OF A BANK’S BRANCH MANAGER PART II: THE SEMINAL LEADERS The People DEEPAK PAREKH K.V. KAMATH CHANDA KOCHHAR ARUNDHATI BHATTACHARYA ADITYA PURI PRAMIT JHAVERI SHIKHA SHARMA OM PRAKASH BHATT RAGHURAM RAJAN U.K. SINHA VIRAL V. ACHARYA JASPAL BINDRA V. VAIDYANATHAN LEO PURI BROOKS ENTWISTLE Footnotes HOW TO DEAL WITH CORRUPT BOSSES OF STATE-OWNED BANKS (PART I) HOW CORRUPT ARE OUR BANKERS? Epilogue List of Abbreviations Acknowledgements Follow Penguin Copyright Advance Praise for the Book ‘Tamal Bandyopadhyay is one of the foremost thoughtful journalists writing on Indian finance today. He has the knack of going beyond the obvious and asking the right questions. In this collection of articles and essays, Tamal takes the reader through a tumultuous decade, offering a ringside view of major developments in Indian banking and insights into the thinking of the major protagonists. It will be of value for anyone interested in India’s financial development’—Raghuram Rajan, professor of finance, University of Chicago, and former governor, RBI ‘Many of us are aware of financial developments, but to understand why they happen and what the implications are, one must read Tamal’s columns. He brings in a rare insight into every policy development and explains things in a very lucid way, backed by sufficient data. Most importantly, he does not take any position, but leaves it to his readers to conclude whether it is good, bad or ugly. A rare quality for a columnist’—Deepak Parekh, chairman, HDFC Ltd ‘An outstanding compilation of essays on contemporary issues in money and finance in India, reflecting Tamal’s amazing grasp of the interplay of issues, ideologies, individuals and institutions—indeed, a collector’s item’—Y.V. Reddy, former governor, RBI, and chairman of the fourteenth finance commission ‘Authoritative and lucid, Tamal’s columns have made him one of the most trusted and influential financial journalists of the country. Even the very discerning turn to his writings for guidance’—D. Subbarao, former governor, RBI ‘An exceptional book on the events that unfolded in the last decade in Indian finance by one of its keenest observers. Macro in its ambition and yet adequately micro in its detailing, a must-read for every student, practitioner and policymaker in, or interested in, India’—Viral Acharya, deputy governor, RBI ‘The book touches upon events right from the global financial crisis to the latest efforts of financial inclusion and demonetization in India’— Arundhati Bhattacharya, former chairman, SBI Praise for Bandhan: the Making of a Bank ‘Tamal Bandyopadhyay is a gifted storyteller who combines the sharp vision of a finance expert with a journalist’s skill for observation and narration’—Kaushik Basu, former senior vice president, World Bank ‘The transformation of Bandhan, a microfinance company, into a universal bank is as unique as the transition of Tamal from a business journalist to an author. As governor of the Reserve Bank, I had grown to respect Tamal for his passion for financial journalism, his enormous talent and endearing professional integrity. He combines all those attributes to tell the remarkable behind-the-scenes story of what it takes to overcome the challenges of last-mile connectivity in Indian finance’—D. Subbarao, former governor, RBI ‘As an acclaimed journalist with decades of experience in financial markets, Tamal brings an intensity along with sincerity and integrity to his writing. In this book, he has woven a colourful canvas which draws the attention of the reader and makes him read, think and deliberate’— U.K. Sinha, former chairman, SEBI ‘This is a fascinating story, deserving to be chronicled. And who better to do so than Tamal. It is a very revealing study—a must-read for those even remotely interested in this sector. The story is narrated by a person as well informed as a hands-on banker and has all the attendant nuances’—Vinod Rai, former comptroller and auditor general of India ‘Bandhan, India’s youngest bank, has a deep and long history behind it. First of its kind, the book takes the reader through India’s journey towards financial inclusion. Tamal brilliantly captures a story of hope and what it takes to lift millions of Indians out of poverty’—Deepak Parekh, chairman, HDFC Ltd ‘Replete with fascinating anecdotes and containing perceptive pen portraits of some of the pioneers in the industry, the book makes for compulsive reading for