We are friendly, so we have cronies.

If there is an index of scams India will surely come first. Last month Nitin Sandesara, said to be a pharma tycoon from Gujarat, fled to Nigeria with family and some Rs 50 billion borrowed from banks. The Life Insurance Corporation of India (LIC) was forced by the government to buy a controlling stake in IDBI Bank which has bad loans of Rs 556 billion. It is probable that LIC will have to write off a sizable portion of IDBI's bad loans, and, although LIC is too big to be affected, it is a blatant case of politicians siphoning policyholders' money to plug holes in budget expenses. LIC will make an open offer to buy IDBI shares from minority shareholders from 3 December. The government is forcing the Bank of Baroda and Vijaya Bank to merge with loss making Dena Bank, with bad loans of Rs 158.66 billion. Shareholders of the Bank of Baroda lost 14% in value and those of Vijaya Bank lost 11%, while shareholders of Dena Bank pocketed a profit of Rs 5.76 billion, wrote Prof A Purnandam. Now there is an even greater panic about a shadow bank, the Infrastructure Leasing & Finance Services (IL&FS) company which has defaulted on interest payments and repayment of loans. IL&FS has total debt of about Rs 910 billion of which about Rs 300 billion could be repaid by selling assets, but that would take at least 18 months. The Institute of Chartered Accountants has issued notices to several accounting firms to explain how they missed the pile up of debt during statutory audits. Actually IL&FS has been hiding its finances for years, wrote G Haldea. "The modus operandi of IL&FS across projects was to get the central and state governments to set up Special Purpose Vehicles (SPVs) and trusts where the checks and balances associated with public funds were grossly undermined. Under the SPV model, IL&FS would typically contribute 50% of the equity while an equal amount came from the government. As a result, they can expend public money as if it were private." A government official of the rank of secretary or above would be made the chairperson. "The objective was to project these SPVs as if they were government entities implementing public infrastructure projects. To make further inroads into the government, IL&FS employed several serving and retired bureaucrats and also distributed largesse such as jobs for their children." Why did institutional shareholders, auditors, regulators and rating agencies, which regularly gave it a triple A rating, miss deliberate misuse of public funds, asked an angry A Dharker. SA Aiyer thinks that crony capitalism has been virtually eradicated from India. Impossible. We Indians are a friendly people. Cronies are inevitable.