Mankind has a funny relationship
with the Written Word. For some lucky chaps, it is no more important than a
buffalo (bhains barabar). We have
reproduced at the end, an interesting poster designed for a past ‘International
Literacy Day’.
You’ll find a number of
‘written-word’ jokes prevalent among journalists. Naturally so, they eat, live
and breathe the written word. One anecdote goes like this: At a party,
Professor Simon enters into an argument over the identity of the farthest
planet, with another reveller, who unbeknownst to the Professor, is a
sub-editor in the leading local daily. The Sub has insisted that the planet
is not Pluto, but Uranus. Deciding to
trick his adversary, a few editions hence, the Sub publishes an anonymous
report, describing Uranus as the planet farthest from the Sun. Sure enough,
Professor Simon reads the article, and apologises to the Sub over phone,
stating that he had now read the correct name in the ‘Paper’- Uranus.
Then there is the contrary
version as well. A thief steals into a mansion, and reaches for the safe, which
has a solid steering-wheel handle, with the words “To open turn clock-wise”
boldly inscribed over it. That’s unfortunately a safety contraption, and sets
off a huge alarm, the moment the thief complies. Caught, the boy rues to the
police about the below-belt tactics, and vows never to trust the written word
again!
Well, what we intended to write
today was a serious article about the hazards of not reading every word of a
document you’d put your signature to. This is, of course, in the context of
Banking. “Read the whole file from its front to label the trade-mark on the
back”, one of our ex-bosses used to say, and sure we never took the trouble of
emulating him till we came to grief one day.
In the Indian finance world, during
an expansionary phase of the economy, the banker is nagged again and again by
Corporates, “for issuing an NOC to cede pari
passu charge or second charge on the securities” held by the original
bankers, right? It is common for banks eager to lend, to approach with fixed
tenure ‘Corporate Loan’ proposals, all companies with an acceptable rating. Needless
to say, ‘Consultants’ will play their own roles. The economy being in an
expansionary phase, the stock markets will be booming with due assistance from
Merchant Bankers, because Capital will be required for expansion and for
leveraging loans. Moreover, the Corporate Loan is liable to be treated as NWC
or long-term resource for the purpose of working capital loans. In such a
scenario, existing Companies will be tempted to make some easy money by playing
the secondary market, and therefore banks flush with funds have lots of takers,
who naturally demand some security. In the case of loans running into hundreds
of crores, bank branches have to approach their respective Boards repeatedly
for approval. Back in the early 2000s in the country’s commercial capital, when
we headed a bank branch with fund-based loan portfolio approximating $ 2.00
bn., such requests accounted for half the agenda of our Board meetings. That
was till Banks started appointing Security Trustees from among FIs, flavour of the
decade being The World’s Local Bank (TWLB), apparently the best at deception,
with its FII+Local pedigree….
The main lenders in the market,
that is the Public Sector Banks, naturally tend to be rigid, and a bit slow on the uptake, and there is lot
of heart-burn as the applicant Companies can miss the stock market bus, it’s so
touch and go. Of course, I* * * * Ind could step in with a Clean Loan, but for
a Price…
So…this company A Ltd. one day out
of the blue, appointed TWLB as the Security Trustee. Naturally, TWLB had no
stake in the loaning arrangements. A Ltd. has a huge security base, at least on
paper, and was one of the companies prone to the said requests. The next
Consortium Meeting meant for fresh documentation was arranged at the best starred
hotel near the airport strategically, to ensure that bankers from outside
Mumbai came and went back same day, allowing them only a jiffy in the city.
That is, they were not in a position to apply their minds to the tomes of
papers dumped before them. Those days the only bank which insisted that draft
of documents be made available to them for legal vetting allowing reasonable
time, was UTI Bank aka Axis Bank. In the case of A Ltd., unfortunately, AXIS
was not a member of the lending arrangement. We were, of course officials of
the Chabiwala Bank, having little
time to get quintals of documents vetted, relying upon the sense of fairplay of
the Trustees. Fairplay is the forte of our Bank. The fourteen participating
banks had 2 representatives each, thirteen being ‘follower’ or non-leader banks,
and one leader bank. The main document was supposed to be signed by the Leader,
which they would do any day, being in cahoots, and the ‘follower’ banks are
really to sign two documents, bestowing authority upon the Leader to sign the
main document. All signs of resistance melted once each banker was served with
a gold plated Cross pen costing a few thousands. Our assistants faithfully
signed the authority documents, and we left.
It was then noticed by the
existing lenders, that A Ltd. stopped approaching with their regular requests.
We made discreet enquiries with ‘Consultants’ who confirmed that the Company was
merrily raising hundreds of crores from various banks. Then do they not require
NOC for creation of charge, or are they all clean loans, we wondered.
The secret was like this: the
main document signed on behalf of ‘follower’ banks by the Leader bank contained
a clause which authorised the Company to approach anyone for a Corporate Loan
and that all the lenders ‘hereby’ agreed
that they had No Objection to ceding pari
passu or second charge to the incoming lender! Before the meeting, the Main Document had
been forwarded to the email addresses of each member bank, and who goes to an
old old site mentioned on your visiting card really? Really clever on part of
TWLB!
MORAL: Believe in the Conspiracy Theories, check all email
addresses, and read every scrap of paper
that falls is you hand. Including BEST tickets, wrappers, and leave
applications submitted by staff. Readers interested in knowing the ' staff accountability' part are assured that the job we do is too complex for HR people or our superiors to understand. As on date none other than the writer and reader of this blog, and the perpetrators of the con know about the affair.
