Chapter 10B: in the aftermath of the 2008 meltdown, the PMO had got their best man on the ground in RBI. The new governor was D. Subarao – an IIT alumnus, an IAS topper, an IIT Topper, a MIT Fellow and a PhD in economics. His PhD thesis was on fiscal reforms at the sub national level. This was the shoulder that the PMO could shoot from to negate anti national forces.
Alongside, the PMO pushed the NIA Act in the aftermath of the terror attack on Mumbai. It was hard to take the act through not just parliament but also through the ruling party. The NIA was watered down to basically go after terrorists from Pakistan and communists. This was the time that China had completely blocked the entry of BigTech from America into the Chinese consumer market. This ensured that if the Havala Bank was indeee caught, they could not be prosecuted under NiA. The PMLA was about people sending money, not about the bank taking it. Or keeping it. It helped not to have a locally incorporated company.
Now back to Sahara and 2010
The citi ecosystem comprised of HDB, SBI (where they had a main board director), Bajaj Finance and Tata Capital / Finance. All three put together had disbursals of well under 2000 crores. And that too from money borrowed from banks. This money had to be returned.
Sahara however was the big gorilla in shadow banking. They seemed to have access to unending money. And they could buy any real estate parcel. No matter how large. They had just bought out the largest land parcel in the western suburbs of Mumbai and were now creating cities, not buildings. They were called Sahara Shaher. And now Sahara Sri had announced that he would take over cable tv and each cable tv employee would be a human ATM. This was bad news.
RBI was beyond tamper. Subarao was not part of the “ecosystem” and the PM – spoke little but didn’t do their bidding. As per Newton’s first law, SBI extended the board tenure of S Venkatachalam. RBI did not object but they did nothing on Sahara.
The first principle of regulation is to encourage new players and avoid market abuse by incumbents. RBI did not see any systemic threat from Sahara. Sahara was not drawing on public funds like HDB was. RBI did not like HDFC Bank creating shadow banks. They wanted HDFC Bank share down to 20% and public ownership. This didn’t suit HDFC Bank. They wanted to keep deposits for themselves and lend money by borrowing the same from govt institutions – pocketing half the interest for zero risk.
The war room came up with an idea. And that idea was to get SEBI after Sahara. But SEBI was led by another set of saints. Who were not in the “ecosystem”. So a new lead had to be found. And who better than the genius who came up with the idea of appointing a Citibank nominee on the SBI main board.
And so started the Sahara saga.
Well before the elections, Saharasri was in jail. For violating not RBI, but SEBI.
And Sahara became history.
