Two yardsticks

Banks readily give huge loans to big corporate houses and when they become bad, there is hardly any accountability. In contrast, small loans given to small businesses that go bad, are pursued aggressively and the book is thrown on borrowers. This reeks of a financial syndrome by India’s financial institutions. The latest controversy involving Essel Group chairman and Zee founder Subhash Chandra is more than another corporate insolvency story. It raises a fundamental question-whether India’s financial system hold powerful borrowers and those responsible for lending public money to the same standard of accountability? On the Zee issue, the National Company Law Tribunal (NCLT) has approved a resolution plan in Chandra’s personal-guarantor insolvency case under which creditors will receive just ₹6.25 crore, besides ₹25 lakh towards process costs, against admitted claims of about ₹22,006.57 crore. The plan received the support of creditors holding 80.81% of the voting value, although several major lenders opposed it. However, this is not an isolated one. It is part of a much larger problem that has troubled India’s banking system for years- how to separate genuine business failure from reckless lending, weak due diligence, poor oversight and manipulation at highest levels.The Reserve Bank of India (RBI) reported 2,664 companies as willful defaulters as of March 2024, involving bank dues of about ₹1.96 lakh crore. Parliament was recently informed that banks had written off ₹9.95 lakh crore in loans to large corporate and services over 12 financial years. A write-off is not a loan waiver; borrowers remain legally liable and recovery can continue. Taxpayers deserve a straightforward answer on how much has actually been recovered? The list of major corporate failures is long. Videocon Group faced lender claims of roughly ₹86,126 crore. DHFL became another major insolvency case, while the IL&FS crisis exposed vulnerabilities across banks and financial institutions. The collapse of Jet Airways also left substantial claims with lenders. India’s bad-loan crisis cannot simply be attributed to one government or one period. Much of the problem originated during the earlier credit boom, particularly in infrastructure and industry. What changed after 2014 was not necessarily the creation of the problem, but its recognition. Gross Non Performing Assets(NPAs) consequently rose from 4.3% in 2014-15 to 11.2% in 2017-18.Loans become bad if businesses fail, markets change and even carefully assessed loans can turn sour. If bankers fear prosecution whenever a loan goes bad, they may become excessively cautious about financing infrastructure, manufacturing and other risky sectors. However, the opposite extreme is equally dangerous. The crucial question is what happened when the loan was sanctioned?. If account became stressed, were recovery and restructuring decisions taken promptly? A small borrower can face immediate action over a modest default, while a powerful borrower may remain locked in restructuring, litigation and negotiated settlements for years. Legal complexity may explain some differences, but it cannot justify unequal treatment. India needs greater transparency in large lending, restructuring and settlements. Major exposures should have strong audit trails, independent reviews and clear documentation. Accountability must be evidence-based where Bank officials who acted properly should be protected. Those found guilty of reckless lending, concealment, misconduct or deliberate delay must face proportionate consequences. The principle is simple: public money deserves the same scrutiny whether the borrower is small or powerful. The Chandra case should therefore become an opportunity to ask whether India’s banking system is delivering not just recovery, but transparency, accountability and equal treatment.