In the foreword to the book, From Lehman to Demonetization, KV Kamath, president of New Development Bank of BRICs countries, has written that author Tamal Bandyopadhyay is a “mythical bowler” who can deliver all sorts of bowls on different pitches. I can’t agree more with Kamath. The canvas of the book is vast—the collapse of Lehman Brothers, the issues of microfinancing, the fall from grace of public-sector banks, rise in bad loans, banking reforms, the conflict between the finance ministry and the Reserve Bank of India (RBI) and, finally, demonetisation. Bandyopadhyay has chronicled all these meticulously with relevant facts and figures, impeccable analysis and an inimitable sense of humour. I can’t think of any finance writer in contemporary India who can deal with such dry subjects with humour and, at times, cynicism. The result is an imminently readable compilation of essays on the most tumultuous decade of Indian banking and finance. You may not agree with all his arguments, but you must give Bandyopadhyay credit for the fact that he doesn’t claim to know it all. He puts his arguments on the table and leaves it to the readers to decide whether to accept or reject them. For me, that’s the biggest takeaway from this book.
The fall of Lehman and the consequent financial crisis that spread rapidly to different parts of the world, leading to a severe liquidity crisis, is well documented in many books. A risk-averse India’s central bank shielded the banking system and economy, even as it flooded the market with tonnes of money and brought down the interest rate to the lowest level ever to kickstart the economy.
Bandyopadhyay relives those times graphically just like a film—how a proactive RBI and finance ministry ring-fenced the banking system from vulnerability.
Indeed, the actions of the RBI at that time had other repercussions and Bandyopadhyay does not miss out on anything—the rise in inflation and bad loans, and how the central bank contained them, or is still trying to contain them. The chapter on bad loans—right from their origin to the arduous path of recognition and now resolution—is brilliant, to say the least.
What is most remarkable about the book are its twists and turns. The story of microfinance institutions is a case in point. These institutions provide funds to low-income populations. Bandyopadhyay gives ample facts in support of his findings in favour of the need for microfinancing, the scope of financial inclusion via the same and the level of profit that such institutions can enjoy. He deftly narrates their journey to hell and subsequent resurrection—eight out of 10 small finance banks are from microfinance institutions and one of them has even become a universal bank.
Bandyopadhyay understands well the beast called public-sector banks—which account for 70% of banking assets—giving the reader an insider-like account of the fall of public-sector banks from grace. The discovery of the saas-bahu syndrome (the relationship between the predecessor and the successor in a PSB) or the feudal lord-like behaviour of some of the bosses—he tells all with juicy details. However, all these details are written dispassionately and without any malice. On a more serious note, he has also explained the need to reform the method of selection of heads and bank representatives.
The same dispassionate objectivity can be seen in the chapter on corruption. Here, Bandyopadhyay’s approach is clinical. Barring a few names that are already in the public domain, he has not named a single person, but explained the modus operandi of corruption with such precision that one can almost visualise it. And herein lies the success of a finance writer—going beyond the jargon, he has narrated real-life stories, which all of us can relate to.
Bandyopadhyay is at his satirical best while dealing with some of the misadventures of successive governments—the Bharatiya Mahila Bank and Mudra Bank, to name only two. He succinctly questions why these were set up and what purpose they served. His observation on the Banks Board Bureau—a paper tiger—is equally scathing. With a vague mandate and no clarity of role, the bureau is counting its days and Bandyopadhyay is not someone who will shed tears for it.
The much-discussed conflict between a growth-oriented government and an inflation-wary RBI has also been clinically focused upon. He has cited some communications exchanged between the RBI (during the Subbrarao regime) and the finance ministry (when Pranab Mukherjee was FM) and makes a case as to why such spats are avoidable.
The RBI is a reluctant supporter of demonetisation. Without joining the national debate on the issue, the highly observant author has laid down the pros and cons meticulously to let readers decide whether it was a boon or bane for the Indian economy. Among other things, he has focused on increasing financial inclusion as a benefit of demonetisation—money is flowing into equities that have replaced real estate for the time being. But will it last? Clearly, the right time for that answer is far away.
Bandyopadhyay’s last piece on the 50 days in the life of a branch manager tells the real story of demonetisation—the ground realities. Similarly, the very first piece, How a young finance professional’s world collapsed during the Lehman days, presents the reality of those days. These parts come across as the work of a gifted novelist, not a finance writer. These two pieces alone make the book worth reading.
Conversations with the Indian financial sector’s seminal leaders—interviews conducted over the past decade—offer rare insights into the finest minds of Indian banking. They are the people who have a ringside view of the enormous changes that the Indian financial system has undergone in the past decade. This section itself could have been a separate book.
By any means, it has been a rollercoaster decade. And Bandyopadhyay has deftly chronicled it with all its nuances and undercurrents. The epilogue at the end is a pointer to the next decade and its dominant trends. However, one critical aspect that the book has not touched upon is technology. By the author’s own admission, he has avoided it because it is difficult to keep pace with changing technology. Barring this, it is a faultless book—a Bible for all those interested in Indian banking and the financial sector, written by someone who understands the sector, has empathy and a good sense of humour.
Pravakar Sahoo is professor, Institute of Economic Growth, Delhi University Enclave, Delhi