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Telephone Banking

In a hard hitting reply to the super flop no confidence motion moved by the Opposition, the PM severely castigated the Congress, for creating the giant bank loans NPA crisis, which he said was like laying land mines, which are now being cleared up by the NDA government. He called this scammy saga, as ‘telephone banking’, wherein a neta or his babu, made a call to senior most bankers, who thereafter hastily  sanctioned huge loans, without even appraising the project and when the borrower defaulted in repayment, instead of taking suitable recovery action, a fresh loan was disbursed to repay the defaulted loan. The PM said that while this shady practice started in 2008, it was at its peak during the UPA 2 regime ie. from 2009 to 2014, such that the aggregate bank loans, which were at Rs.18 lacs crores in 2008, ballooned to a mind blowing Rs.52 lac crores in 2014. It was a clear case of corruption induced reckless lending by banks. Such loans were obviously given to political favourites and sheer common sense says that their foundation was pecuniary quid pro quo.

In a similar manner, India’s outgoing CEA, Shri Arvind Subramanian, during a briefing of parliamentary panel on bad loans last month, while expressing skepticism over the government’s handling of the NPA crisis, indicated that the big ticket bank loans which have turned bad, were ‘influenced’. That’s a confirmation of what the PM calls telephone banking to give loans to favourites, in utter violation of regulations and banking norms.

The turn of subsequent events shows that due to this dubious/corrupt practice of telephone banking, the entire Indian banking system got corrupted and a rot set in across the board. The bank chairmen colluded with the babus and the netas to give big loans to the most unworthy, but very powerful and influential borrowers, who had direct access to the corridors of power in Delhi. Thereafter, since the bank chairmen had obliged the topmost babu and neta and were obvious partners in the crime, in a similar manner now, the senior most bankers merrily gave loans to very undeserving borrowers, because now it was their turn to make their gains. The rot percolated down further to the junior levels, who were aware of the reckless loans given by their seniors and decided to go for their kill too, though comparatively small. The rot started from the top and went down to the bottom of the hierarchy, each one indulging in corrupt and questionable practices in their domain, and each level being quite aware of the malpractices of the other. Since the entire banking system was in a state of decay, the outside agencies like auditors, advocates, valuers, rating agencies too got infected and colluded with the all round scam. Some colluded for a price, while others did so, only to remain in the system and not be boycotted by it.

It was this telephone banking from top to bottom that has brought India’s banking system to a grinding halt, on whose revival depends the growth trajectory of the Indian economy.  

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