School For Scandals

So, the CRB Capital fiasco has been hogging front page space in most financial newspapers in the last few days. Journalists have rightly begun reminding the nation that they have been vindicated once again. For several months, they have been maintaining that the regulatory system in the financial sector is still not foolproof. But the authorities ignored such criticism and the CRB fiasco was an outcome of such negligence. Commentators have been pointing out how CRB Capital has got a favoured treatment from the central bank and the Securities and Exchange Board of India. And they have also been warning that the CRB bubble would burst one day. Now that it has, journalists are justifiably filling the front pages with the details of the scandal.

In the process, some of them have also gone overboard. Irresponsibility has taken the garb of aggressive and investigative reporting. Even though no run on deposits of other non-banking finance companies has actually taken place, there are alarmist stories being splashed all over the front pages saying that such a run on other NBFCs deposits is likely to take place. Others are pointing out that the danger signals of such a crisis had been evident for all to see. But the authorities chose to ignore them under influence of politicians.

One cannot complain much about the manner in which newspapers are writing about the CRB scandal. If the authorities have allowed a system to flourish in a manner that such scandals do erupt with a fair degree of regularity, why should journalists be blamed for raising a hue and cry over the adverse impact such a scam has over the ordinary investors?

But isnt the role now being played by journalists very restrictive in nature? Can journalists (including this writer) escape from the larger responsibility that is vested in them? That responsibility does not end with just reporting a scandal. As a watchdog, the journalists role is also to keep reminding the nation of the progress of investigation into the various scandals that they have reported in the past. If there has been no action on nabbing the culprits, journalists have to be as alert in pointing that out as in bringing to light a fresh scandal.

Unfortunately, that is not what has happened in the last few years. About five years ago, the countrys financial system was hit by what is popularly known as the multi-crore securities scam. This became the medias obsession for about a year and a half. But after that, the media has virtually forgotten the securities scam. Till today, not a single person has been prosecuted. The major disputes are yet to be resolved. The alleged culprit of the scam, Harshad Mehta, is moving around freely amidst reports that he has once again become an active player in the stock market. But none of this has so far moved the media to reporting the governments indifference and inaction.

The same drama was enacted when the MS Shoes scandal broke out. Almost the entire financial press went after MS Shoes and its promoter, Pawan Sachdeva, in 1994 and early 1995. But two years later, nobody has any clue on what punishment was meted out to Pawan Sachdeva or whether the investors recovered their money.

If journalists have been remiss on not keeping track of the major financial scandals, the government is no less guilty for not having put in place a system by which early and expeditious action to punish the culprits can be taken. Despite the best of systems, financial scandals are very often inevitable. But the important point here is that there must be a system in place by which those who flout the norms are quickly brought to book. Unfortunately, while the financial sector has been liberalised, the system of punishing the guilty has not been beefed up.

The governments inaction on creating a system for expeditious settlement of scandals and related disputes has also given the economic reforms programme a bad name. It is a fact that the Indian financial sector has witnessed quite a few big scandals since economic liberalisation in 1991. And critics have been blaming the policy of economic reforms for these scandals.

If only the media had continued its focus on the financial scandal in a more sustained manner, the government might have been forced to beef up the system of punishing the guilty. But in reality, neither has the media undertaken any intensive follow-up investigation of the actions taken after a scam breaks, nor has the government done anything to quicken the response of its legal machinery to punish the guilty.

It is, therefore, high time that journalists did not just restrict their role to only reporting extensively on a scandal as long as it was in the news. They should evolve an internal system by which they could periodically focus on the degree of inaction and indifference of the government in punishing the guilty. They could also focus their attention on investigating the causes that lead to scandals. Only then can journalism be an important pillar of Indian democracy.