Institutions and individuals respond differently in similar situations.
At times, the former could think and act stupid because, well, they are institutions. They can be disdainful of common sense and everyday pragmatism of the private individual.
Vijay Mallya’s stand-off with banks is a case in point.
Let’s elaborate on this: As private individuals, we lend small amounts to friends and relatives. Trust is the only collateral here. The consideration of interest or compounding interest is mutually agreed upon and again, trust is the basis of such arrangement. When the lender realises, after repeated reminders, that the other person is not in a position to repay, either due to mala fide intent or other reasons, the sensible thing would be to forget the interest and get back the principal amount first. If it requires engaging him continuously, through persuasion or pressure, he has to do it.
Taking him to the police is an option but never a wise one.
The lender, if he has all the proof in place, may put the borrower behind bars, but it won’t serve the primary purpose. Chances are he will never get the money back.
The best option for the private individual is to keep the conversation going. If the borrower is willing to discuss paying back at least the principal amount, it is accepted. It’s not an ideal solution, but getting back some money is better than getting nothing. Pushing the other guy into a position where he decides not to pay at all is not smart thinking.
But in Mallya’s case, it appears, banks think quite differently from common lenders. They have taken the all-or-nothing approach to recover dues from him, which they claim amounts to around Rs 9,000 crore. When Mallya offered Rs 4,000 crore to banks as a partial resettlement, they rejected it in undue hurry. He had assured the clearance of the money by September this year. Of course, given his track record it’s obvious that they would be suspicious of such an offer.
It’s possible, like they and several media commentators claimed, that the Kingfisher boss was only buying time; his real intention was to find more technical reasons to evade payment. But in the bargain, they have almost lost — a five-month wait could not have hurt banks more than it has already.
After slipping up badly on the loan deals, they were trying to be brave as a face-saver.
An influential section of the media crying itself hoarse over Mallya, painting him as a criminal, cheat, fugitive and what not could have spurred their action. But the reality in this case is they are on the receiving end. By burning bridges with Mallya, they have encouraged him not to return to the country and of course, to forget the money altogether.
After the revocation of his passport, threats of action from enforcement agencies and punitive action from the political class, it might be extremely difficult to bring him back. He might convince the British courts that his was a case of business failure and not fraud as being made out in India, and he might never get extradited. Even if he is extradited, made to face the legal process and convicted, chances of banks getting back the entire sum of money are slim.
Thus, any way you look at it, the banks end up losers.
Their course of action could have been more pragmatic. But then they are not us. They deal with public money, we deal with our own. They can get away with lapses on their side, we cannot because the loss of money hits us directly. They are institutions; they can afford to have egos, we cannot.
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