Dear custodians of this crucial beat,
In the competitive pursuit of chasing stories, it is very easy to become an incumbent, a friend of your sources. This happens all the time, in all the beats, from politics and health to sports and finance. And that’s why it is important to maintain an arm’s length distance between your sources and your work. The question today is: do you really need to be seen as extensions and spokespersons for the Reserve Bank of India (RBI)? Over the years, we have seen the banking regulator degenerate into becoming an industry association, a spokesperson for banks. Do you need to consolidate its misguided position, its weak regulation, or worse?
When Cobrapost released its tapes, many of you in India’s largest newspapers and TV channels ignored the tapes, underplayed the story and in some shocking cases, spoke as if you were RBI. When you justify the statistically-insignificant fines imposed by RBI on three banks that have been caught on camera ready to accept unaccounted-for money in cash — money that could have come to fund terror activities or as part of a laundering cycle — by saying more than anything else it is a “dressing down”, it tells us four things.
One, you haven’t done your homework, you don’t know what’s going on in your beat at the level of branch — the point-of-contact for the millions of depositors, whose interests you are supposed to protect as a watchdog. As a result, you act as a supporting cast for a regulator that has consistently acted in favour of banks rather than depositors or borrowers. When you do this with pride, I feel embarrassed for you.
Two, by using expressions like “RBI has given banks a dressing down” or “RBI has expressed its displeasure” you not only speak the bureaucratic language of a regulator whose time has gone but showcase your closeness to the bureaucrats running it — at the cost of depositors, investors. Regulators are not supposed to be displeased or be in the business of giving dressings down. They are supposed to regulate, transparently. Understand the difference.
Three, as a banking correspondent or editor if you have the courage to say that a fine of Rs 10.5 crore on the three banks is large enough, you are clearly unfit to serve the banking beat. When you justify that shamelessly-low number by saying that “depositors will be hurt”, a line that top officials of RBI regularly infuse reporters with, you become an incumbent of the worst sort, complicit in the act of omission and hence stupid, and possibly of commission and hence complicit.
And four, the rigour is missing. Else, you would have put the fines in perspective in some way, howsoever small. For your benefit, I’m using profits before tax — you can choose your number — a figure that reaches the pockets of the bank managements and after paying taxes, its shareholders and in no way, whatsoever, affects the depositors from whose shoulders you fire these justifications.
The penalty on Axis Bank was Rs 5 crore, or 0.05% of its profit before taxes (PBT) for the last fiscal. That on HDFC Bank stood at Rs 4.5 crore, or 0.04%; while the penalty on ICICI Bank totalled Rs 1 crore, or 0.008%.
Let’s look at it in another way. What Axis Bank paid as a fine was less than 5% of the PBT it made in one day in the last quarter. The equivalent figures for HDFC Bank and ICICI Bank are 3.5% and 0.7%.
If you still don’t understand these numbers, here’s another way to look at them. If the fine and “shame” process that RBI has imposed on these banks were to be followed by tax authorities, here’s what it would mean. If we don’t pay a tax of Rs 1 lakh, we would get a “dressing down” that would convert into a fine of between Rs 7 and Rs 54. Oh, what we wouldn’t do to get this “dressing”. And since none of the top management has been punished, I would presume we wouldn’t too, a comforting thought.
On a serious note, may I urge you, dear reporters and editors, to do the following:
* Relook at your beats in the context of a changing India. We are no longer in the 1970s, the nationalisation of banks is long behind us, private banks have come in and will continue to expand to sell products to a changing demographics, a more prosperous people. The regulatory structure and worse, the regulatory attitude, of RBI unfortunately is still trapped in the past. Understand that and push the RBI to evolve from an association that protects its member banks to a modern regulator.
* Forget RBI and banks: they are just the tools with which you serve consumers. If you have lagged behind in the global regulatory changes and need an education, read the consumer-focussed FSLRC report and see what lies ahead for the financial sector in general, and banks and RBI in particular. Then change the texture of your financial reporting.
* Behave like a watchdog, not an incumbent. The crumbs of access RBI throws at you mean nothing to those you are supposed to serve. Don’t behave as branch offices of banks or RBI.
* If you find the inevitable changes above difficult to follow, leave the industry and join banks — you’ll make a lot more money than journalism ever could offer.