After Demonetization, and GST, Bank frauds are the new shake to Indian economy

Bank Frauds

The common man in India is riding on a whirlpool always fearing for rapids. Sometimes it is Demonetization; sometimes it is GST and now all of the above the frauds in banking sectors.

After Demonetization, people considered banks as a safe place to keep their hard-earned money. Millions of Indians deposited their life-time savings, and then a new chapter of bank fraud came into existence.

The borrowers loot the money with their wicked ways taking advantage of the lapses and loopholes of the Indian banking system, and the common man is left behind bearing its consequences. The most surprising part is banks are not even unaware of being cheated initially, it takes years for them to recognize that they are the victim of deceit.
An unprecedented 6,801 frauds, totalling Rs 71,500 crore, were detected in FY19 which reaches 15% high in volume and 80% hike in value from last year, as per the Reserve Bank of India (RBI) data.

PMC bank was recently in the news for fraudulently extending loans to Housing Development & Infrastructure Ltd (HDIL), risking deposits of numerous customers.

Another biggest fraud that holed the Indian financial system with Rs 11346 crore was by country’s renowned jeweller Nirav Modi and three other jewellers have given a big shake to the banking industry. RBI has directed PNB to pay Rs 11346 crore to the lenders, or it may create a disorder in the financial system of banks in India.

Another fraud case of Rs 5000 crore came into limelight when the director of Andhra Bank and directors of Gujarat based Pharma company Sterling Biotech withdraw the cask from bank accounts of several fake companies. The loan later turned into arrears. All thanks to mismanagement and underreporting that leads to fraud making a big hole in common man’s pocket.

Every time a fraud happens, some sympathy along with heated discussion is done to gain attention, and things become normal after a few days. Nobody cares for poor depositors who have sped their life in earning that amount. Does bank think the money deposited by ordinary people is their property which whenever they feel can give to anyone?
The irony is Indian banks created for Indians have regular loan waivers and corporate loan write-offs, but there is no financial arrangement to protect the common man’s savings.
Out of all the frauds, 73% of them were high-profile corporate frauds above 100 crores in worth, and public sector banks gave 92% of these loans. It takes a few minutes to provide the credit and 55 months to detect its fraudulently. It has raised a question about the norms of giving loans.

Is it the loopholes in the Indian banking system or the result of some planned conspiracy?

The Central bank has alerted the entire banking system many times. The negligence is due to the risk of reputation, interference of probe agencies, and the instinct of self-preservation. Credit rating agencies or the auditors who highlight the risks are also to be blamed.

As of March 2109, 26 urban cooperative banks have been placed under Central bank for putting depositors’ money at risk. This year, a few months ago, the Central bank also fined banks 76 times, Rs 123 crores for non-reporting of fraud. RBI deputy governor has directed all the banks to create a ‘compliance culture’ in their banks, respectively. According to him, lack of compliance is the sole biggest reason for the increase in bank frauds.

During the RBI’s Asset Quality Review exercise undertaken in 2015, many discrepancies in structuring the loan accounts came into limelight. After 25% of loans to the corporate sector were declared toxic by Asset Quality rating in 2017, the Central Bank issued February 12 circulates to reconstruct the bad loans.

According to the circular, the lender has been instructed to refer all accounts over Rs 2000 crore, which is even a day default. The bankers must inform the National Company Law Tribunal(NCLT) or bankruptcy court if they are not able to resolve the issue in 180 days. But this circular didn’t work in the benefits of the common man.

I hope the government would look for a better way to sort out this fraud scam.

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