Once upon a time, banks and bankers commanded respect. But the reputation has corroded thanks to the string of bank frauds
When the PMC bank fraud cropped up, it was not the employees or trustees who panicked, but the hapless investors who were staring at a crisis. File pic
Wikipedia has, rather unsurprisingly, a very long page under the title 'List of Scandals in India'. These range from the misappropriation of scholarship funds to scandals involving liquor licenses, disproportionate assets to dubious land deals. What is surprising is how many times bank frauds crop up. There is the Rotomac bank fraud of February 2018, for instance, or the fairly recent Punjab National Bank Scam involving an infamous diamond merchant, along with a number of lesser-known banks that involve staggering amounts of money for a country still struggling to keep millions above the poverty line.
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In 2018, a media report publicised the fact that over the last 11 fiscal years, there had been 53,334 fraud cases reported by banks involving R2.05 lakh crore. According to the RBI, bank fraud touched an unprecedented R71,500 crore in 2018-19.
There are two ways of looking at this statistic, starting with the fact that a lot of banks are losing money on account of being targeted by criminals. What isn't talked about is the presence of people like us, who must eventually bear the brunt of these crimes, directly or indirectly, watching our savings erode in the absence of better security.
When a billion-dollar scandal involving the Punjab & Maharashtra Co-operative (PMC) Bank was announced weeks ago, it wasn't employees or trustees of the bank who panicked. It was depositors like us, who suddenly woke up to a crisis not of their making when the bank restricted them from withdrawing more than 1,000 rupees for six months without offering any explanation. By the time that was rectified, life savings had vanished, a man had a heart attack, and there were people protesting outside RBI headquarters begging for explanations.
And then there are the co-operative banks. I'm not sure anyone knows how they come into being, how they operate, what they do with the money given to them by depositors, or why so many experts think of them as private accounts created for politicians alone. Much has been written about how these banks hoodwink auditors, stay under the RBI radar, issue letters of credit that would never stand to scrutiny elsewhere, and are staffed by shady boards of directors. And yet, despite the years we have had to recognise that there is a desperate need to reform these institutions, we are compelled to sit back and watch as they crumble like packs of cards every other year. No one wonders why.
There are all kinds of reasons why customers of these co-operative banks struggle to get back the money they have lost. The banks may not matter in the larger scheme of things, their size preventing government entities from being too interested in examining their reasons for failure. This ability to fly undercover means nothing to those who invest in them though, because, the smaller the bank, higher the chances of it ruining the life of someone who has everything to lose. Those who are rich hedge their bets or focus on large banks. It is those who have little to spare who turn to these banks in the absence of alternatives. For proof, simply look at the back of a rickshaw or taxi to find out which banks those vehicles have been hypothecated to.
Once upon a time, we looked upon banks as safe houses, where our parents would put their salaries and look forward to withdrawing their funds after retirement. They were untouchable, solid, and respected institutions. To work at one was something to be proud of, and something that made it easier for people to marry because everyone wanted a husband or wife who worked at one.
I wonder if that stellar reputation still stands, given all we have been put through. I don't think of banks or bankers with respect anymore, because I no longer have faith in their ability to take care of my money. Too many scams, scandals, and slip-ups on their watch have made me doubt the abilities they proudly advertise on hoardings across the city. It is what they don't talk about that worries me.
The next time you receive a video on WhatsApp of a senior citizen weeping her eyes out after being told her savings have been wiped out, think about where your money is, how hard you have worked for it, and whether it will be there when you need it most. This year, it happened to customers at PMC Bank. Next year, it could be your turn.
When he isn't ranting about all things Mumbai, Lindsay Pereira can be almost sweet. He tweets @lindsaypereira Send your feedback to mailbag@mid-day.com
The views expressed in this column are the individual's and don't represent those of the paper
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