Thursday, June 17, 2021
HomeOpinionDiaryIs banking becoming a bad word? - Part-II

Is banking becoming a bad word? – Part-II

Our money, their bonanza

After the 2008-crisis, banks worldwide have taken appropriate measures to tighten their internal checks.  But, we are beating our own records, y-o-y, from Rs 1,300 cr Indian Bank scam in 1992 to today’s Rs 11,300 cr PNB scam. Our tax money has absorbed the cost implications of the “recapitalisation” of Rs 2.11 lakh crores.

When asked about the non-relief to the salaried class in the recent union budget, Finance Minister Arun Jaitley said that they needed to undergo some sacrifice. If scams are reduced by half, even without paying so much taxes, we could avail world class banking services.

The rulers cannot be indifferent to reality. Will those who were cahoots in design be brought to justice? Unless top echelons of the banks and boards are held accountable, Mallyas and Modis will only mushroom. With crooks and morons in the management, there is little hope. 2019 will be a steep ride for the BJP.

“Bernie” Madoff, the $65b-ponni scheme convict was handed out a 150-year jail sentence by the Federal Reserve, in a remarkable 6-month probe time.  Back home, judicial delays and easy adjournments lend support for the crimes.

“Bail-in” threat

The bankers’ attitude is indefensible because in the end it is customers and taxpayers who paid for fraud through increased charges and taxes. The entire nation sacrificed a lot in the demonetisation exercise to unearth black-money.  Sadly, these banking ‘bombshells’ would defeat the purpose, and any sacrifice only goes to drains.

A sad day when bankers who know such things cannot happen in our system, are not coming out to voice their opinion on a public platform. No wonder, the Financial Resolution and Deposit Insurance (FRDI) Bill 2017 is staring at the common man.

In banking parlance, “right of set off” meant the legal right of a bank to seize deposited funds to cover a loan that is in default. Probably, it could be redefined to “cover someone else’s loan” that is in default. If more skeletons are detected, don’t be surprised Art.51 of the Bill (the “bail-in” clause) getting ferociously invoked to save the ‘ailing’ banks.

Fix the fraud

Is it safe to believe whatever is reported by bank managements and their regulators? How secure is to trust the data dished out by RBI on NPAs? The dent is glaring. More loans despite red flags?

RBI governor, the prime custodian of banking morals, who is not aware of 143 Letter of Undertakings (LOUs) issued by the next-in-line largest Indian bank till the fraudsters left the land, should ensure time-bound return of public money. The apex bank chief should explain the chain of lapses and excesses. The corrupt officials should be ruthlessly placed behind bars.

Make forensic audit mandatory for all big ticket borrowing accounts. Given the suspicious banking ambience, it is okay to mistrust the obvious. Pass “wilful default” a criminal offence. Recall, when an accountant’s endorsement on a financial statement signified integrity. Not any more, thanks to fancy accounting. Identify the tainted auditors, revoke their academic credentials and notify in the public domains.

Bank Board meetings normally were either rubber-stamp affairs or, in event of mild disagreement, directors exchanged polite comments.  Angry, acerbic argument was virtually unknown.  Perhaps, a win-win situation!

If the entire liability of frauds and NPAs booked is reckoned, it might result in a serious hit on the bank’s book value per share. The malaise afflicting the nationalised banking system is at once a deeper problem.

In the bad old days, it was the groups that controlled particular banks that cornered credit and otherwise used the resources of the bank to their advantage. Now, it is particular politicians, civil servants and bankers that are being freely mentioned as getting rules bent and regulations flouted to secure advantages to preferred clients.

Is this the new avataar of the “ease of doing business” in India?

Finally

Focus more economics, less politics. Discuss the complicity of the case. See who the beneficiaries of the LOUs are. Is Nirav Modi coming back? Is our money coming back? Bank loot impacts you and me. Once you’ve endangered the system or a single bank, diminished public confidence does the rest. Today, the nation has to fight hydra-headed monsters. A high-level enquiry into the working of the PSBs, especially their overseas branches, brooks no delay.

Satyameva Jayate!

(The views expressed by the author in the article are his/her own.)

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