With Money Crisis Going On, It Looks like Only THREE Banks will Survive-Blood Bank, Eye Bank & Sperm Bank?
Mangaluru: With Banks getting merged, and couple of banks recently involved in fraud (PMC Bank and Yes Bank), bank customers are now worried as to How safe is their money in their respective banks? Sources reveal that in the 1990’s Private-sector players allowed to open banks based on 1991 Narsimham Committee recommendations. ICICI Bank, HDFC Bank, Axis Bank and IndusInd Bank among others given licence. Several private banks later put under moratorium due to mismanagement and some merged with PSBs or bought over by other private banks.
While reading about the fate of bank customers of Punjab Maharashtra Bank, and now Yes Bank, there are real people expressing real fears. Their basic question: “Is our money in the banks safe?” What happened at the PMC Bank—with a staggering 70 per cent of the loans sanctioned to the Housing Development & Infrastructure Ltd (HDIL)—is not the malaise but just one of the symptoms of the illness that afflicts India’s banking sector. And it has led to growing concerns about banks—crippled by a pile of bad loans, frauds and collapse of a major infrastructure lender, besides several other issues. For the government of the day, matters of money are always sensitive politically. At least five depositors, who had money stuck with the PMC Bank, have died since the fraud surfaced. One committed suicide. And now with the Yes Bank crisis, we could also hear some news of affected customers
Yes Bank Branch on GHS Road in Mangaluru
The crisis of confidence in the banks was so palpable that the Reserve Bank of India (RBI) was forced to issue a statement on 1 October 2019, reassuring that the “Indian banking system is safe and stable and there is no need to panic on the basis of such rumours”, a rare comment from the banking regulator. But it seemed like it never materialized. After the PMC Bank fraud came to light, and also the recent Yes Bank crisis, the biggest question haunting Indians is: “Is our money in the banks safe?”. Speaking to Team Mangalorean, a bank manager said, ” Fear has already crept into the minds of bank depositors. The fear might increase and that might lead to a collapse of the banking sector, which has not happened so far in this country because we have the guarantee that public-sector banks should not be allowed to fail,”. Will it be true or false, God will only know?
Sign Posted Outside Yes Bank in Mangaluru
The fraud in PMC Bank and now the money laundering and fraud created by its MD. This, along with the merger announcements of 10 major banks, increased bank charges and closing of around 2,000 bank branches because of mergers, have contributed to the lack of faith in the government. The merger agenda started two years ago, with the State Bank of India (SBI)—the largest lender in the country—amalgamating its subsidiaries. This was followed by Dena Bank and Vijaya Bank merging with Bank of Baroda. In its latest round, four more merger proposals involving Ten banks have been announced.
Opinion is divided on whether the mergers would strengthen or improve functioning of the banks. “The full impact of these mergers would take some time to show. It is expected that in a few years, systemic stability and operational-scale benefits would creep in,” said one finance expert, seeking anonymity. The problem with the mergers is that along with asset consolidation there is also consolidation of non-performing assets, which pose their own set of challenges, the expert adds. A bank failure in the current market, could exacerbate risks.
The tales of bank frauds, despite the oversight, shows a strong nexus between borrowers and top managers of lenders. If this continues to happen, depositors who have put their hard-earned money in banks may well continue to receive shocks, till a strong system of accountability is put in place.
