Endangered savings

Perhaps the most disturbing development for the common man since Independence is the Financial Resolution and Deposit Insurance Bill (FRDI), 2017. Subterfuge in naming measures injurious to people’s interests is standard practice. This ‘deposit insurance’ bill is, in effect, deposit non-insurance bill. It empowers banks to play as they wish with the hard-earned money you have deposited with them in good faith.

First, you were robbed of the choice to keep your money with the banks or elsewhere. Poor housewives used to keep the small amounts they managed to save over decades in cash. In one fell swoop, demonetisation snatched their tiny kitties from them and pumped that money into banks. The banks were recapitalised by decapitating people’s meagre, domestic resources. The State-corporates control over the life of citizens is now, in principle, near-absolute. With the FRDI Bill, we move from principle to practice.

This measure, like all other measures meant to privilege the State-corporates continuum at the expense of the common man, is couched in the form of a reform. In history, nearly all State-sponsored reforms have worked to the detriment of common people. In the present case, legislative loosening of your grip over your own hard-earned money will ensure the profligate survival of banks.

And banks: what have they been doing? What else, but serving our interests by accumulating a strange sort of assets. It is called non-performing assets, or NPA. This is a philosophical riddle of the most mysterious kind. It is a measure of this performance that it creates what is ‘non-performing’. And what is thus ‘non-performing’ is an asset!

In the meanwhile, you, the ordinary citizen, have been sweating and toiling, tightening your belt and penny-pinching in anticipation of the rainy day when there will be none to offer you a meal. The sweat and blood of your brow you put in your banks. You hoped your money would belong to you and that you could bank on it.

But the government knows that there is something — sorry to borrow Manmohan Singh’s words — called “legalised plunder”. Yes, it is your money; but only till it is plundered. Then it becomes someone else’s money. And that mystery is called “good governance”. Here is how it might work.

You have, let’s say, Rs 5 lakh in ‘your’ fixed deposit. You ‘fixed’ it under certain terms and conditions, by which it remained ‘your’ deposit. Now your bank — like all banks — has a soft corner for hardwired corporates, who are armed to the teeth with the indulgence of the State. They can borrow, and not return. But this is not a crime because it generates ‘assets’ — swelling mountains of non-performing assets.

Then the next stage of the riddle. Banks become bankrupt because of these ‘assets’. You and I, being not economists, would have thought that ‘assets’ made banks richer. Not so, in this case.

So, when your bank becomes bankrupt because of the ‘assets’ it has generated, it should not have to worry; because, in an era of good governance, no bank will be allowed to perish. Citizens can rot in hell, but banks must thrive. For they are the life-lines of corporate loot. That is where you help, without wanting to. Your bank can use your money, right down to the bottom line, to keep itself going. You just swallow it. Thank you.

The Government of India, through the Deposit Insurance and Credit Guarantee Corporation Act (1961) had already reduced the liability of banks, irrespective of how much you deposited with them, to Rs 1 lakh. But we could still sleep in peace, thanks to your faith that the Reserve Bank of India would not let banks go bust.

The FRDI Bill could have the effect of knocking this hindrance out of the way of the banks-corporates nexus. Section 52 of the FRDI Bill pulls the rug from underneath even the Rs 1 lakh guarantee you had till now. If so, the banks can tell you politely, “Look, forget your deposit. It has just evaporated.”

So, what’s happening to us? What does the future augur for us? Not everything is clear as of now. But one thing is clear, and that’s scary.

Capitalism? Socialism?

Historically, the right to private property has been the cornerstone of capitalism. It was socialism that deemed private property as theft. The classic text, on this issue is, What is Property? by Pierre-Joseph Proudhon (1840), a line of advocacy followed by a host of respected socialist thinkers in Europe.

Through globalisation, capitalism — with its dogma of the inalienable right to private property — is supposed to have won the final victory over socialism. If so, the right to private property should have become more inviolable and sacrosanct.

Now watch the magic the State can play! Yes, your right to private property is fine. But the question is, “Where does it begin and where does it end?”

What FRDI Bill will do is to abolish, in effect, the distinction between private property and corporate property. As G K Chesterton wrote in Usurers of Utopia — how suggestive and prophetic the title is!— “the rich man today does not only rule by using private property; he also rules by treating public property as if it were private property.” When Mallya decamped with Rs 9,000 crore, whose money was it?

The distinction between private property and corporate booty is being dismantled. Remember, we are a country without even a rudimentary commitment to social security. Think of the old people who, since the emergence of nuclear families, have only interest earned from their bank deposits to live on.

In one murderous blow, this roof of security will be removed from over their heads. They will be consigned to a hell of uncertainties. Already, they are bent double under plummeting interest rates. With the present step, they can forget about rates, and even rations.

(The writer is former principal, St Stephen’s College, Delhi)