Why did bank frauds balloon as laws were being tightened? | The Inside Story Of Indian Banking
By Sandip Sen
The banking sector all over the world has struggled with reforms. Money laundering through tax havens is rife as many bankers actively promote corruption to boost business. Yet it remains highly profitable and banks remain liquid due to periodic stimulus or bailout by the central bankers and because Governments in developed nations and China print money at will.
But India does not have that luxury. The confidence in the Rupee is waning and though forex reserves are reasonably high it has the lowest investment grade rating with a limited scope of fiscal stimulus or bailout. So cleaning up India’s banking system that started in 2015 was an overdue measure. But few understood the enormity of the task as the reforms began.
This story of painstaking reforms in a corrupted banking system is intriguing as an unsolved murder mystery. As if detectives are working overtime but the serial killers are outsmarting them time and again. The Inside Story of Indian Banking explores why this is happening?
Speaking to over sixty bankers and stakeholders of the industry it identifies the porosity within the system and reasons why things have gone wrong. It also identifies why NPA’s are rising despite increased scrutiny on commercial banks and the issues of the poorly regulated NBFC sector and co-operative banks.
The inside story does not delve into failures alone. It also discusses the solutions. It explores the new bankruptcy laws and the NCLT infrastructure that have been put in place. It also discusses the weakness in the supervisory setup and the need to reform the regulators. It talks about why credit flow stopped and how to revive it. It delves on which bank mergers may succeed and which may not.
It details how to restructure PSBs and make them accountable. It also speaks of the Covid crisis and the impact of the extended lockdown on the economy and the banking sector. The bankers we spoke to lead us to ideate seven solutions for reviving Indian Banking. This is a must-read for anyone wanting to understand the system that holds our money.
***