Almost 3 years and bank yet to recover it's overdue loan amount

One of the key thrust areas announced by the Government when Dorjee Khandu took over the reign of state from the then Chief Minister Gegong Apang was to revive the sick lone state owned bank Apex Bank and to re-instill the faith of customers'. In this direction, the state government had taken a loan of Rs. 225 Crores from Hydro Power giant NHPC Limited at an interest rate of 9% per annum to be adjusted against the 'free power' to the state from 2000 MW Subansiri Lower H.E. Project after its' commissioning. With that amount the government somehow managed to make the bank sail through the phase, when the bank was in the verge of collapsing and to retain its' license. And in order to re-instill the customers' loyalty, the government announced rigorous recovery drive from the defaulters and to hand over the inquiry to CBI for all the mess that the lone state owned bank fell into. That was during the second quarter of year 2007.

Now coming back to present, it has been around 3 years since the announcement and Dorjee Khandu has been re-instated to 2^nd term in office. So, where do our government stand on that front? Was the government or the bank able to completely recover the overdue loan amount from defaulting customers in these 3 years? I guess not. Because, through the March 18^th edition of 'The Arunachal Times', the Apex bank has announced launching of recovery drive from May, 1^st and has offered OTS (One Time Settlement) Scheme to settle the overdue loans of the defaulters.

Apex bank to launch recovery drive

ITANAGAR: Apex Bank authority has decided to launch recovery drive against defaulting borrowers from the first of May next.

The bank has launched one time settlement (OTS) scheme to settle the overdue loans of the defaulters, a release of the Bank said, and requested all the defaulters to opt for the scheme at the earliest.

The bank further appealed to the state and central govt authorities to obtain ‘no objection certificate’ from the bank before releasing any payment to their contractors/suppliers which would help the bank recover dues.

But, when government announced rigorous recovery drive almost 3 years back what took it so long for the bank to launch the recovery drive? But hey! if I remember well, didn't the bank earlier also announced one time settlement (OTS) scheme for settlement of overdue loans? If so, then how many more OTS scheme would be offered to the defaulting customers'? Is the bank and the government indeed serious about recovering the loaned out amount from the defaulting customers? Or as I put earlier, was it (announcement of rigorous recovery drive and CBI inquiry into the Apex Bank mismanagement) a gimmick just to subdue the initial outrage of people who felt cheated off their hard earned money?

Was Rs. 225 Crores deal a smart move?

On the one hand, New Delhi is holding the fate of the state to ransom-no one knows for sure what will be the final outcome of boundary settlement with China and on the other hand, as some quarters feels, the policy maker’s of our own state is holding the future of the state to ransom. And that too, despite the warning and protest by them not to mortgage the future of the state.

On 24^th June evening, a cheque of Rs. 225 Crores exchanged hands between S. K. Garg, CMD of National Hydroelectric Power Corporation Limited and Dorjee Khandu, Chief Minister of Arunachal Pradesh, which the state government is taking as an advance to be adjusted against 12 per cent free power share (water royalty) in future, on the pretext of reviving the state owned sick Apex Bank.

When the state government announced their plan to revive the sick state owned Apex Bank by taking some amount as an advance against revenue to be accrued from ‘water royalty’ (free power) from the Hydro Developers in the state, it was presumed that advance would be given to the state government without any additional rider-just as a simple token for allowing them to take up Hydroelectric Project in the state. But, I forgot, they all are business institutions and there is a way to do business. And indeed, the Rs. 225 Crore advance given by NHPC Ltd. against 12 per cent free power of 750 MW each Tawang-I & Tawang-II Hydroelectric project and 3000 MW Dibang Multipurpose Hydroelectric Project was not without a rider, it was with an interest at a rate of 9% per annum to be compounded annually which was to be adjusted only after commissioning of the project. And this, the government feels, is a miniscule amount and would not over burden the debt service liability of over Rs. 1000 Crores that it presently has.

“[..] the state government would pay interest of 9% for the amount only after commissioning of the projects, including 2000 MW Lower Subansiri Project at Gerukamukh, which would be adjusted from the 12 pc free power to be provided to the state by the corporation, he added. When his attention was drawn to large protests by various quarters for taking advance and thereby mortgaging the future of the state, Sanjay clarified that the state already had a debt service liability of over Rs.1,000 Crores and this small amount would not be a burden. Some sections were trying to sabotage the government initiative, which was a serious threat to the state development, he commented.”

– Echo of Arunachal

Was the move smart enough?

I would say, surely, but in the context of National Hydroelectric Power Corporation Limited alone. By extending this advance or should I say, a loan of Rs. 225 Crores, NHPC Ltd. has made a clever business move. Basically, any Hydro Power Developer would have started earning only after commissioning and commercial operation of the project, but here in this case, NHPC Ltd. would be earning right from signing of MoA. Now, technically, they have all the rights to execute these mega projects namely, 750 MW Tawang-I HEP, 750 MW Tawang-II HEP and 3000 MW Dibang Multipurpose HEP. And with this deal they have clinched 3000 MW Dibang Multipurpose Hydroelectric Project from the state government and would now be developing alone which was earlier announced as a Joint Venture between the State Government and NHPC Ltd.-which, I thought then, was the only sensible step that the State Government took in these entire exercise of tapping the Hydro Power of the state. But now that too has gone to NHPC Ltd.

By asking for this advance/loan of Rs. 225 Crores the State Government has actually set itself back by at least 1 ½ years. Considering the long gestation period of any Hydroelectric Project-here 9 years for Dibang Multipurpose Project, 6 & ½ years for Tawang-I Project and 6 years for Tawang-II Project (Source-NHPC Ltd.), if we assume that all the three projects are up and running by 9^th year (the time that would be required for construction and commissioning of Dibang Multipurpose Project) from now and with the 2268.78 MU (Million Units) of energy that the state would receive as a 12% free power from 18906.5 MU of energy generated by these mega projects in a 90% dependable year (Source NHPC Ltd.) and with a tariff of say @ Rs.1.64 per unit (levellised tariff for Tawang-I Project), we may actually end up earning from these projects only after 2^nd year of commissioning of these projects, thereby, as felt by some quarters, mortgaging the future of the state by 2 years.

Coming to the main purpose of taking this advance; the state government is contemplating engaging private consultancy firms from Kolkata and Mumbai for evolving management system in the Arunachal Pradesh State Apex Cooperative Bank to run it with professionalism after its revival. But would the sick Apex Bank indeed be revived? I’ve my apprehension's though. And if the state government keeps on making such deals to cover-up for their mismanagement instead of bringing the culprit to book and recover the amount, the claim of Aruanchal Pradesh becoming the richest state in the country when the state starts earning revenue in the form of free power from these Mega Projects, seems quite vague to me.

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And coming back to the question 'was the move smart enough?', I'd say yes. Now, the people are left guessing how soon can they withdraw their money and close their accounts.

Update (17-07-2007): Hmmm.....the wait of the poor customers' would be ending soon for the CM has announced reopening of the State owned Apex Bank from August 2.

"About 65,000 account holders of Arunachal Pradesh State Cooperative Apex Bank have reasons to cheer with Chief Minister Dorjee Khandu today announcing its reopening from August 2 next."

-The Arunachal Times

Hope the Cheer of Account Holders are not short lived.

Was Rs. 225 Crores deal a smart move?

On the one hand, New Delhi is holding the fate of the state to ransom-no one knows for sure what will be the final outcome of boundary settlement with China and on the other hand, as some quarters feels, the policy maker’s of our own state is holding the future of the state to ransom. And that too, despite the warning and protest by them not to mortgage the future of the state.

On 24^th June evening, a cheque of Rs. 225 Crores exchanged hands between S. K. Garg, CMD of National Hydroelectric Power Corporation Limited and Dorjee Khandu, Chief Minister of Arunachal Pradesh, which the state government is taking as an advance to be adjusted against 12 per cent free power share (water royalty) in future, on the pretext of reviving the state owned sick Apex Bank.

When the state government announced their plan to revive the sick state owned Apex Bank by taking some amount as an advance against revenue to be accrued from ‘water royalty’ (free power) from the Hydro Developers in the state, it was presumed that advance would be given to the state government without any additional rider-just as a simple token for allowing them to take up Hydroelectric Project in the state. But, I forgot, they all are business institutions and there is a way to do business. And indeed, the Rs. 225 Crore advance given by NHPC Ltd. against 12 per cent free power of 750 MW each Tawang-I & Tawang-II Hydroelectric project and 3000 MW Dibang Multipurpose Hydroelectric Project was not without a rider, it was with an interest at a rate of 9% per annum to be compounded annually which was to be adjusted only after commissioning of the project. And this, the government feels, is a miniscule amount and would not over burden the debt service liability of over Rs. 1000 Crores that it presently has.

“[..] the state government would pay interest of 9% for the amount only after commissioning of the projects, including 2000 MW Lower Subansiri Project at Gerukamukh, which would be adjusted from the 12 pc free power to be provided to the state by the corporation, he added. When his attention was drawn to large protests by various quarters for taking advance and thereby mortgaging the future of the state, Sanjay clarified that the state already had a debt service liability of over Rs.1,000 Crores and this small amount would not be a burden. Some sections were trying to sabotage the government initiative, which was a serious threat to the state development, he commented.”

– Echo of Arunachal

Was the move smart enough?

I would say, surely, but in the context of National Hydroelectric Power Corporation Limited alone. By extending this advance or should I say, a loan of Rs. 225 Crores, NHPC Ltd. has made a clever business move. Basically, any Hydro Power Developer would have started earning only after commissioning and commercial operation of the project, but here in this case, NHPC Ltd. would be earning right from signing of MoA. Now, technically, they have all the rights to execute these mega projects namely, 750 MW Tawang-I HEP, 750 MW Tawang-II HEP and 3000 MW Dibang Multipurpose HEP. And with this deal they have clinched 3000 MW Dibang Multipurpose Hydroelectric Project from the state government and would now be developing alone which was earlier announced as a Joint Venture between the State Government and NHPC Ltd.-which, I thought then, was the only sensible step that the State Government took in these entire exercise of tapping the Hydro Power of the state. But now that too has gone to NHPC Ltd.

By asking for this advance/loan of Rs. 225 Crores the State Government has actually set itself back by at least 1 ½ years. Considering the long gestation period of any Hydroelectric Project-here 9 years for Dibang Multipurpose Project, 6 & ½ years for Tawang-I Project and 6 years for Tawang-II Project (Source-NHPC Ltd.), if we assume that all the three projects are up and running by 9^th year (the time that would be required for construction and commissioning of Dibang Multipurpose Project) from now and with the 2268.78 MU (Million Units) of energy that the state would receive as a 12% free power from 18906.5 MU of energy generated by these mega projects in a 90% dependable year (Source NHPC Ltd.) and with a tariff of say @ Rs.1.64 per unit (levellised tariff for Tawang-I Project), we may actually end up earning from these projects only after 2^nd year of commissioning of these projects, thereby, as felt by some quarters, mortgaging the future of the state by 2 years.

Coming to the main purpose of taking this advance; the state government is contemplating engaging private consultancy firms from Kolkata and Mumbai for evolving management system in the Arunachal Pradesh State Apex Cooperative Bank to run it with professionalism after its revival. But would the sick Apex Bank indeed be revived? I’ve my apprehension's though. And if the state government keeps on making such deals to cover-up for their mismanagement instead of bringing the culprit to book and recover the amount, the claim of Aruanchal Pradesh becoming the richest state in the country when the state starts earning revenue in the form of free power from these Mega Projects, seems quite vague to me.

And coming back to the question 'was the move smart enough?', I'd say yes. Now, the people are left guessing how soon can they withdraw their money and close their accounts.

Update (17-07-2007): Hmmm.....the wait of the poor customers' would be ending soon for the CM has announced reopening of the State owned Apex Bank from August 2.

"About 65,000 account holders of Arunachal Pradesh State Cooperative Apex Bank have reasons to cheer with Chief Minister Dorjee Khandu today announcing its reopening from August 2 next."

-The Arunachal Times

Hope the Cheer of Account Holders are not short lived.

Revival Package for Apex Bank-would the package indeed revive the bank?

When Dorjee Khandu took over the reigns of the state from Gegong Apang, he announced three thrust areas for his new government; 1. rooting out corruption from every corner, 2. streamlining of the PDS and 3. revival of sick Apex Bank. With public deposit base of Rs. 160 crores and bank going bankrupt, I wondered then, how the new government would go about reviving the bank. How would the bank repay the depositors amount? Would the bank be able to retain its customer’s loyalty, if at all revived? There were so many unanswered questions. Initial thought was that if the Government sincerely wanted to revive the bank, it would go all out in recovering Rs. 147 crores loaned out amount from the defaulters and initiate probe against those responsible for all this mess; to show that no one is above the law and can swindle away the public money just like that and finally would pay back the depositors money from the recovered amount to instill their faith in the lone state owned bank. And in this direction, the Government indeed started a recovery drive and decided to hand over the case to CBI, only to put all the initiative to cold storage after a while. May be the step was taken to subdue the initial outrage of the depositors and it gambled off well, I must say, with no much hue and cry from the depositors.

Now all of a sudden, the state government announces revival package of Rs. 225 crores to be obtained from NHPC (National Hydroelectric Power Corporation) Ltd.-a PSU that is involved in harnessing hydroelectricity at Arunachal Pradesh-as an advance to be adjusted against 12 % free power share in future to the much resentment of certain NGO. The Voluntary Arunachal Sena (VAS) questioned the logic behind such a move “to mortgage the future interest of the state” and demanded to know the basis that prompted the Union Power Ministry and NHPC to grant this special dispensation to the state Government. The Government termed this initiative as pro-poor and that revival of bank through this package would bring relief to the thousands of poor customers, who had suffered untold miseries since the bank became sick some 18 months ago.

No doubt, it would end the sufferings of poor customers who just don’t seem to know how to get back their hard earned money from the bank. But, would this Rs. 225 Crore revival package indeed revive the sick state owned Apex Bank? Does this package really ‘pro-poor customer’s’?

Let’s glance over the statistics. Out of this Rs. 225 Crores, the bank has to cough up about Rs. 160 Crores that it owes to its depositors and I’m pretty much sure that the depositor would not want to keep their amount further in the bank and would withdraw whatever amount is left in their accounts and close their accounts at the first given opportunity. Also, as I was told, Rs. 40 Crores has to be deposited as a security to retain license to run the bank. Then there are outstanding salaries to be paid to the employees of the bank and other office expenditures. So, where is the amount left to revive this sick state owned bank? Is the whole initiative just an eyewash? In case the bank wants to carry on its business, there is little scope that it would return all the money of the depositors. Then, how is this initiative pro-poor customer’s? How would it end the agony of the customer’s? I don’t have a clue.

And when the management of the bank and the politicians are hands in glove for this entire mess, I don’t understand the logic behind mortgaging the future interest of the state. How is this justified to use the revenue of the state to cover-up for their interest (to divert attention of public from loan defaulters) instead of putting the revenue in development of the state? Shouldn't they emphasize more on loan recovery than taking advance or grant, whatever, from other institutions? Or as someone has said, is it yet another exercise by the Government to make some privileged few a millionaire overnight again at the pretext of bringing relief to poor customer’s? Though the government has assured transparency, it is yet to be seen how transparent would the Government be, in dealing with this initiative.

Revival Package for Apex Bank-would the package indeed revive the bank?

When Dorjee Khandu took over the reigns of the state from Gegong Apang, he announced three thrust areas for his new government; 1. rooting out corruption from every corner, 2. streamlining of the PDS and 3. revival of sick Apex Bank. With public deposit base of Rs. 160 crores and bank going bankrupt, I wondered then, how the new government would go about reviving the bank. How would the bank repay the depositors amount? Would the bank be able to retain its customer’s loyalty, if at all revived? There were so many unanswered questions. Initial thought was that if the Government sincerely wanted to revive the bank, it would go all out in recovering Rs. 147 crores loaned out amount from the defaulters and initiate probe against those responsible for all this mess; to show that no one is above the law and can swindle away the public money just like that and finally would pay back the depositors money from the recovered amount to instill their faith in the lone state owned bank. And in this direction, the Government indeed started a recovery drive and decided to hand over the case to CBI, only to put all the initiative to cold storage after a while. May be the step was taken to subdue the initial outrage of the depositors and it gambled off well, I must say, with no much hue and cry from the depositors.

Now all of a sudden, the state government announces revival package of Rs. 225 crores to be obtained from NHPC (National Hydroelectric Power Corporation) Ltd.-a PSU that is involved in harnessing hydroelectricity at Arunachal Pradesh-as an advance to be adjusted against 12 % free power share in future to the much resentment of certain NGO. The Voluntary Arunachal Sena (VAS) questioned the logic behind such a move “to mortgage the future interest of the state” and demanded to know the basis that prompted the Union Power Ministry and NHPC to grant this special dispensation to the state Government. The Government termed this initiative as pro-poor and that revival of bank through this package would bring relief to the thousands of poor customers, who had suffered untold miseries since the bank became sick some 18 months ago.

No doubt, it would end the sufferings of poor customers who just don’t seem to know how to get back their hard earned money from the bank. But, would this Rs. 225 Crore revival package indeed revive the sick state owned Apex Bank? Does this package really ‘pro-poor customer’s’?

Let’s glance over the statistics. Out of this Rs. 225 Crores, the bank has to cough up about Rs. 160 Crores that it owes to its depositors and I’m pretty much sure that the depositor would not want to keep their amount further in the bank and would withdraw whatever amount is left in their accounts and close their accounts at the first given opportunity. Also, as I was told, Rs. 40 Crores has to be deposited as a security to retain license to run the bank. Then there are outstanding salaries to be paid to the employees of the bank and other office expenditures. So, where is the amount left to revive this sick state owned bank? Is the whole initiative just an eyewash? In case the bank wants to carry on its business, there is little scope that it would return all the money of the depositors. Then, how is this initiative pro-poor customer’s? How would it end the agony of the customer’s? I don’t have a clue.

And when the management of the bank and the politicians are hands in glove for this entire mess, I don’t understand the logic behind mortgaging the future interest of the state. How is this justified to use the revenue of the state to cover-up for their interest (to divert attention of public from loan defaulters) instead of putting the revenue in development of the state? Shouldn't they emphasize more on loan recovery than taking advance or grant, whatever, from other institutions? Or as someone has said, is it yet another exercise by the Government to make some privileged few a millionaire overnight again at the pretext of bringing relief to poor customer’s? Though the government has assured transparency, it is yet to be seen how transparent would the Government be, in dealing with this initiative.

Become a ‘Millionaire’ overnight

What?”

“How?”

(On a second thought) “Are you kidding?”

Of course not, this really is possible in the land of “Khusi Khusi” and that too legally – the only prerequisite being affinity to or acquaintance with some local politician.

How?

All you need to do is identify a Financial Institution owned and managed by State Government and if you fulfill the ‘prerequisite’ (knowing the Branch Manager of that Financial Institution will be an added advantage), just walk up to that Financial Institution and apply for whatever amount as loan against any plot of land or forests area (be it reserved forest) or for that matter even whole of Arunachal State – the fulfillment of ‘prerequisite’ will make the Financial Institution not to verify whether the said plot does really exists or not or if it does exists then whether it suffice as mortgage for the applied loan; your loan is sanctioned and voila you are a ‘Millionaire’ overnight.

“But then, you have to repay your loan amount?”

Hell no. You don’t have to bother about the repayment as no one will pay back and with such a huge amount disbursed as loan to so many persons, the Financial Institution is bound to shutdown one day or the other. The Management and the Government would be too busy pointing fingers at each other for mismanagement of the Financial Institution to ask you for repayment.

Even if they do, then there always is ‘Citizens’ Grievances Forum on that particular Financial Institution’ through which you can accuse the financial institution of shutting down before you are able to repay the loaned amount. And you can sue the Financial Institution for defaming you by flashing your name in the TV Channels and Print Media as defaulter in repayment of loan. (Pretend that) After all, you wanted to repay the loaned amount but for the closure of that Institution.

And for fear of losing the defamation suit, the bankrupt Financial Institution would ask you to keep the amount without repayment in lieu of you withdrawing the ‘Defamation Suit’ as they won’t be able to cough up huge amount as compensation in the eventuality of losing the ‘defamation suit’. And you are a ‘Millionaire’ that too legally without any liabilities to Financial Institutions.

Blame your luck though, becoming a ‘Millionaire’ overnight now would just be a dream, for the lone state owned and managed financial institution, Apex Bank is in shambles. The government and the management of the Bank is pointing fingers at each other for the present condition of the Bank and to make the matter worse, a Citizen’s Grievances Forum on A.P. State Co-operative Apex Bank (CGFAPSCAB) which has been formed recently (most of the members, which I presume are the loan defaulters), is blaming the bank for shutting down making the loan defaulters unable to repay their amount.

The people had to become 'millionaire' and they became one, the bank had to shut down and they did but what about the people-mostly daily wage earner who had entrusted the bank to take custody of their daily earnings?

Become a ‘Millionaire’ overnight

What?”

“How?”

(On a second thought) “Are you kidding?”

Of course not, this really is possible in the land of “Khusi Khusi” and that too legally – the only prerequisite being affinity to or acquaintance with some local politician.

How?

All you need to do is identify a Financial Institution owned and managed by State Government and if you fulfill the ‘prerequisite’ (knowing the Branch Manager of that Financial Institution will be an added advantage), just walk up to that Financial Institution and apply for whatever amount as loan against any plot of land or forests area (be it reserved forest) or for that matter even whole of Arunachal State – the fulfillment of ‘prerequisite’ will make the Financial Institution not to verify whether the said plot does really exists or not or if it does exists then whether it suffice as mortgage for the applied loan; your loan is sanctioned and voila you are a ‘Millionaire’ overnight.

“But then, you have to repay your loan amount?”

Hell no. You don’t have to bother about the repayment as no one will pay back and with such a huge amount disbursed as loan to so many persons, the Financial Institution is bound to shutdown one day or the other. The Management and the Government would be too busy pointing fingers at each other for mismanagement of the Financial Institution to ask you for repayment.

Even if they do, then there always is ‘Citizens’ Grievances Forum on that particular Financial Institution’ through which you can accuse the financial institution of shutting down before you are able to repay the loaned amount. And you can sue the Financial Institution for defaming you by flashing your name in the TV Channels and Print Media as defaulter in repayment of loan. (Pretend that) After all, you wanted to repay the loaned amount but for the closure of that Institution.

And for fear of losing the defamation suit, the bankrupt Financial Institution would ask you to keep the amount without repayment in lieu of you withdrawing the ‘Defamation Suit’ as they won’t be able to cough up huge amount as compensation in the eventuality of losing the ‘defamation suit’. And you are a ‘Millionaire’ that too legally without any liabilities to Financial Institutions.

Blame your luck though, becoming a ‘Millionaire’ overnight now would just be a dream, for the lone state owned and managed financial institution, Apex Bank is in shambles. The government and the management of the Bank is pointing fingers at each other for the present condition of the Bank and to make the matter worse, a Citizen’s Grievances Forum on A.P. State Co-operative Apex Bank (CGFAPSCAB) which has been formed recently (most of the members, which I presume are the loan defaulters), is blaming the bank for shutting down making the loan defaulters unable to repay their amount.

The people had to become 'millionaire' and they became one, the bank had to shut down and they did but what about the people-mostly daily wage earner who had entrusted the bank to take custody of their daily earnings?