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The major private sector banks, nationalised in late 1960s and early 1980s to function as financial intermediary for the cause of social engineering are now popularly identified for the accelerating financial loss and umpteen frauds.
Punjab National Bank has revealed a massive fraud amounting to Rs. 12,800 crores in the bank account of Nirav Modi, a corporate customer who had fled India even prior to the filing of case against him. In a similar manner, another corporate customer, Vijay Mallaya who had swindled crores of money from various public sector banks as borrowing had already escaped to U.K prior to the filing of charge sheet on him. Such escapes would not have taken place without the help of the hierarchies in the Central Government. Similar actions have been initiated subsequently by Bank of Baroda, as the leader of consortium lending to a well-known corporate customer, Vikram Kothari for fraudulent borrowing without observing prescribed norms. As the owner of public sector banks (PSBs) and, staking claim of their respective share holding more than 50 percent with the representative of Government of India in the respective bank boards, Central Government did not initiate effective preventive steps to avoid the massive financial loss. The money loss originated from the huge amounts as a whole and little contributions, deposited by the public for the sole purpose of security.
Huge non-performing assets of countable corporate borrowers have been written off by banks even in case of security availability, at the behest of policy initiatives of the Government. Farm loan waiver was found significant in the political manifesto of the saffron party is being viewed negatively after it has assumed powers stating that policy narratives do not permit for it. But the systematic writing off exercise on corporate borrowing are on the continuous move, adding loss to the PSBs which lead to the erosion of the respective bank’s capital. For recapitalisation, as the owner to infuse the required capital, very novel method was introduced by the Central Government through floating investment bonds, making the PSBs to invest their fund in them and provide capital to the same PSBs from the invested funds.
How far the international bank standards are going to accept this novel method of recapitalisation, designed by the saffron policy regime?
During the election campaign in 2014, the prime ministerial candidate Narendra Modi promised effective measures to bring back black money sheltered by big men and corporates in foreign banks and thundered that in each citizen’s bank account Rs. 15 lakhs would be deposited from the unearthed black money.
Promise remains still as promise; it never reached the phase of practice. On the contrary in the name of unearthing the indigenous black money, demonetization of Rs. 1000/- and Rs. 500/- currency notes was declared in November 2016 without the original initiative from RBI. Demonetization was adamantly effected unmindful of the suffering of common man. The Government predicted that the demonetised currency notes will not see the light, making the black money in those denominations go to the grave. But actually, the currencies in demonetised denominations which were declared by RBI were all deposited by individuals in their respective bank accounts, making the demonetization meaningless. The major loss to the nation was the fatal end of nearly 100 innocent senior citizens who were unable to brave the scorching sun while standing in front of the bank branches for the exchange of demonetised currency notes.
Nearly for 3 months no commercial banking practices took place in PSBs except the acceptance of demonetised currencies. How can PSBs be expected to earn profit? For the countrywide demonetisation exercise, the PSBs were well exploited by the saffron rulers without any clear cut planning. RBI is yet to announce the quantum of black money unearthed owing to the massive demonetisation exercise.
Another innovative move was also initiated by the rulers to use the prospective appropriation of customer’s deposit money to compensate the financial loss incurred by PSBs. Due to the severe criticism, the move was not carried forward for crystallisation.
When global economy faced the impact of American depression in 2008, the functioning of banking system in India did not stumble or did not exhibit any jerk. That was the strength of Indian Banking system. The position began to decelerate and the banking sector, especially PSBs, are treading in retrograde direction. The saffron rulers did not take any concrete steps to prevent the move though not arrest it. The policy, if not corrected, will lead to the remarkable PSBs losing its ‘public sector’ identity and attain the ‘private sector’ status by being swallowed by big exploitative corporate.
The saffron regime was mandated by falling prey to the gimmicks of ‘growth’ trajectory. Banking system, instrumental for the growth in the economy, has started to perish. Still the lip service of saffron rulers in doubling the farmers’ incomes by 2020 continues!
