We live in the land of scams. The 2010 commonwealth games was a golden opportunity for our scamsters , delays in finalizing contracts, payments to non existent vendors for services never delivered and so on. Suresh Kalmadi , chairman of the organising (fraud) committee was accused of financial wrongdoing ( a few 100 crores) and improper planning ( actually the scam was well planned though the games was not) . As per the accepted Indian custom, slowly the focus on the case waned and Suresh Kalmadi got bail and dropped out of sight.
The Fodder scam in 1996 with the bureaucrats and lawmakers dipping their hands into the till to the tune of 900 crores,led by the irrepressible Lallu Prasaad Yadav and his henchmen showed scant respect for the law and a total lakh of ethics. Even though about 500 accused were convicted including Lallu Prasad Yadav, he continued to control the state through his proxies.
Then of course we have the Satyam scam, 2G spectrum scam, coal gate or the coal scam and the many bank scams.
In 1969 the then Congress Government nationalised 14 major commercial banks. The major objective of nationalisation was to impart greater stability and prevent failures. And in 1993 the banking regulation act was amended opening the gateway for new private banks.
Banks have just two revenue streams, interest income from loans disbursed and service income charged for banking services. Of course some banks have also started promoting insurance and other products as an additional revenue stream. However the banks major role always has been and will remain as a safe depository for the customers wealth in the form of currency,metals or documents. Traditionally the bank by virtue of their customer base and expertise disburses the money in the form of loans, ensuring borrowers have sufficient means to pay back and also insisting on sufficient collateral security in case of any failures.
Recently Mr.Ravi Shankar Prasad, minister for Electronics and Information Technology declared that 25600 cases of bank related frauds worth Rs 179 billion had been unearthed upto end Dec 2017. Considering that the common man has to necessarily provide 100% and more as collateral while seeking a loan from any bank , one wonders how banks get defrauded of 1000’s of crores.
Banks are expected to scrutinize loan applications for ability to repay, reputation and past history and also ensure security is taken to safeguard the banks interest. The system fails only when banks’s officers fail to follow the lending process, fails to apply due diligence or overlooks available information deliberately . This may result in the bank lending to borrowers who have no intention of repaying. Of course sometimes the customers are irresponsible by indulging in speculation and diversion of funds. But here again a diligent alert banker can limit the damage by acting on the tell tale signs of mis use in time. The damage snowballs only when the banker ignores all the warning signs.
Electrotherm India defaulted payment of 436 crores to Central Bank Of India. Bipin Vohra ,a Calcutta based industrialist defrauded Central Bank Of india by getting loans worth 1400 crores using forged documents. Vijay Mallya (King Fisher) has been declared a wilful defaulter. He owes Rs 9500 crores to a consortium of Indian banks. Those who recall his flamboyant living style and focus on his favourite horses, racing teams and of course colourful calendars realize that running his business well or intention to pay back were not part of his vocabulary. The powers that run this country so well were prompt in generating a lot of noise with very little action. While we debate endlessly about extradition process, Vijay (the victor ) Mallya lives comfortably in U.K with no worries except about how to increase his miserly pocket allowance of 5000/ pound sterling per month.
Jain Infra projects defrauded Central Bank of India to the tune of Rs Two Billion.
And the list goes on. Winsome Diamonds, Nirav Modi and many more. These can stop only when our bankers learn to apply the norms diligently. The norms and guidelines more often than not are seen as obstacles to go around when one so desires.
Wise men say that “what cannot be cured must be endured”. Perhaps India should apply to the Guinness Book Of Records for the most scams and wear the endorsement as a feather in our cap
Author: Padmanabhan Nair