Banks are important for us in many aspects as they have multiple and very important roles in financial services all over the world. Banks take deposits from ordinary people, companies and other institutions, they distribute loans to needy and also keeps valuable in their lockers which people cannot afford to keep at their houses securely. In short they are the spine cord of every business and economic life of our world.

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Banks are the pillars of modern economy but, they are also prone to corporate looting. People deposit their hard earned money in banks in a hope to gain some interest and also thinking that their money will be safe there. There must be a trust between the banks and the users. But, recent banking frauds and corruption in banking system has shaken this trust. Banks are no more than the puppets of the capitalist and have become a medium of robbing common man of his hard earned money.

Accounting frauds, cheque frauds, forgery etc. are the simplest form of frauds which are prevalent in banking system but, these are small scale scams in which banking employee are involved. They are not as big as induced by the evil nexus of bankers, corporate and politicians.

There are many recent cases of banking frauds in India. Punjab National Bank (PNB) scam is one of them. This is one of the biggest government owned bank in India. Employee of this bank issued fake bank guarantee worth 13000 Crore INR (One USD = 77 INR, and one crore = 10 million) to Nirav Modi, and his uncle Mehul Choksi, who were jewelry industrialist in India. They have fled away from India in February 2018 and their extradition is still under process. This is not the single example. IL&FS fraud, IDBI, PMC cases happened after this incident. Big Indian Banks had 130000 crore INR as Non-Performing Assets (NPA) in 2014 which was more than 800000 crore INR in March 2020. NPA is the loan given by the bank which has not been paid by the debtors. This amount is finally written off from the accounts of the banks, meaning banks won’t show it in their balance sheets. So, finally it is forgotten.

The modus operandi of the corporate sharks

The amount disclosed by the banks as NPA is just the tip of the iceberg. Company promoters start a business. This is not a simple task. They have to fulfil lots of formalities which are almost impossible if one has no backing of powerful politicians and beaurocrats. After this tedious work promoters list the company in share markets. Ordinary people buys shares of the company. Price of the share is deliberately increased. More and more people buys the shares when its price is bullish. Then the large shareholders (promoters and their allies) sell their shares and gain huge profit from it. Then they take loans from banks in the name of the expansion of their business. Bank loan is diverted towards shell companies of the owners of the businesses. Ultimately, company faces severe losses and the company gets to the verge of closure. Company gets bankrupt after filing appeal for the same and ultimately its assets are liquidated and the creditors gets the share of their lending to some extent. But, it is not an easy thing. There are many formalities which have to be done before it. Also, company has loan amount of many times of the value of its assets. For example banks may have given loan of 50000 crore INR but, the liquidated value of the assets may not be more than 10000 core INR. So, 40000 crore INR never comes back. Also, the interest on it never paid. Bad loan and interest therein form NPA of the banks. The company or the person who buys such liquidated company, arranges money from taking loan from the banks as well. So, the company suffers losses but, the owners and promoters always gain from it. They never become bankrupt but, the banks and the company are robbed of the money. Also, the retail investors who invest in the shares of the company suffers heavy losses and the promoters become free to open a new company and renew the cycle of robbing the banks.

Question arises why such companies get loans from banks despite of showing heavy losses and why their loans are restructured again and again. The answer is that this is possible because of a nexus between the corporate magnates, politicians, beaurocrats and bankers. It is all about money, honey.

Is this possible to stop this loot? I don’t think it is possible because these people are too powerful. Honest people can do as much as to nab one or two such corrupt people but, cutting the leaves won’t harm the powerful tree of corruption which roots are stretched in every sphere of economic system of the world. Politicians are almighty but, they are just the puppets of corporate leaders. Unfortunately, public is helpless before these scammers. There is no hope.

Thank you for reading.