We cannot think about the modern world economic and financial structure without banks. Banks accept money from individuals and institutions, they provide loans to individuals, institutions, businesses and organizations. They also control economy by providing liquidity to the market. Thus banks play a major role in every sphere of our life.

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It is not an easy thing to plunder a bank but, there are many ways by which one can rob a bank. Accounting frauds, cheque frauds, forgery, loan frauds etc. are such frauds that are committed by the bank employees. But, these frauds and petty incidents of corruptions are not as impactful as the frauds and corruption committed by the evil nexus of the politicians, bankers and the corporate sector.

History of banking is full of such incidents in which an individual or a group of thugs robbed a bank and take away its deposit. Robbers used to plunder banks but, it is almost impossible to loot a bank in the modern era and escape unscathed. So, the modern rich plunderers have devised modern ways to plunder banks. In recent time we have seen so many incidents of banking frauds in India that the trust between the banks and the depositors have become very thin. For example in 2018, a scam was revealed in which employee of Punjab National Bank (PNB), which is one of the biggest government owned bank in India, 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, the jewelry magnates in India. After taking loan, both fled away from India in February 2018 and their extradition is still under process. This was neither the first, nor the last incident of banking fraud in India. IL&FS fraud, IDBI, PMC, ICICI bank fraud case etc. published after this incident in which billions of Rupees were involved.

In 2014, Large Indian Banks had 130000 crore INR as Non-Performing Assets (NPA), while it inflated to 800000 crore INR in March 2019. NPA is the unpaid loan and its interest which was given by banks. Banks shows NPAs in their accounts which is finally written off by them if it remains unpaid for some years. Government is not ready to publish the name of the willful defaulters while ordinary person who owes just a few thousand rupees to the banks are humiliated and even jailed for default. So, this demonstrate the way rich and poor are treated by the system.

Modus operandi of the corporate sharks to rob banks and financial institutions

The amount published by the banks as NPA is just the tip of the iceberg. Actual is far greater than anybody can imagine. How the corporate gets loans and how it turn to NPA should be a matter of great interest for us.

First of all a company promoter starts a business. Starting a business in India is not a simple task. It takes lots of formalities to fulfil before a business can be commenced. This is a herculean task which is almost impossible if the promoter has no backing of powerful politicians and beaurocrats. After this tedious initial work, promoter lists the company in share markets. Common people buy shares of the company and thus make the company rich on papers as the share capital is considered one of the assets of the company. Price of the share is deliberately increased and taken to the maximum. This attracts more and more buyers. Then the large shareholders (promoters and their allies) sell their stake and gain huge profit from it. They also take loans from banks in the name of the expansion of their business. Bank loan is diverted towards the personal interest of the owners through shell companies which are formed especially for this purpose. Balance sheet of the company always shows losses. The company ultimately gets bankrupt and the promoters of the company file the case of bankruptcy or at the instance of the creditors, case of bankruptcy is filed before the government. If the court orders liquidation of the assets of the company, then from the realized amount, first of all the creditors get their share in proportion to their loan.

But, finalizing the case of bankruptcy is not a piece of cake. It takes fulfilling of many formalities and takes lots of time. Usually companies owe loan that is many times of the value of their assets. For example, banks may have given loan of 40000 crore INR but, the liquidated value of the assets of the company may not be more than 5000 crore INR. So, there is a shortfall of Rupees 35000 crore and also interest on it. This unrealized amount becomes the NPA of the banks.

This is a vicious cycle. The company or the person who buys any such liquidated company, arranges money by taking loan from the banks as well. So, the company suffers losses but, the owners and promoters always earn huge profit from it. They never become bankrupt. Only the banks and the company are robbed of the money. Ultimately, the common man suffers. Banks are forced to transfer this burden to common man who suffers heavily by paying increased charges to the bank for using their services and also the rate of interest on his loan is increased by the banks to make up their losses.

One can ask why such companies get loans from banks when the companies shows heavy losses and why their loans are restructured again and again. The answer is very simple. Nothing is impossible for unscrupulous persons. Evil nexus of corporate magnates, politicians, beaurocrats and bankers make it possible again and again.

It is impossible to stop this loot because these people are too powerful. A valiant person or the group can nab one or two such scammers but, this will not change the situation. Lost money never returns and also laws are always formed to safeguard rich and powerful people. So, nothing will change in the near future.

Thank you!