Corruption in banks: Demonetisation

There were occasions earlier also to discuss corruption in banks. Post dated August 2, 2014 had this to say:

"S.K.Jain, Chairman and Managing Director of Syndicate Bank has been arrested on charges of corruption by CBI today (2nd August). The surprise is not that CBI has sensed bribery in Syndicate Bank. The shocking surprise is CBI's inability / unwillingness to identify corruption in so many other banks.

It is generally believed that the positions of Executive Directors and CMDs in public sector banks carry a price tag. Only those who pay a 'decent sum' to powers-that-be are promoted to such privileged positions. It is rationalised that such payments are recovered by charging speed-money from borrowers.

This is not to say that all top executives are mercenaries. A preponderant majority perhaps is. Venal politicians have an unhealthy say in bank appointments."

The entry of August 18, 2014 noted:

Writing in The Hindu, C.R.L.Narasimhan, a respected financial journalist makes the following observation:

"The usual way senior executives of government banks get into trouble is through the actions of their subordinates in which case it becomes a question of vicarious responsibility. It is likely that where the number one person actually instigated the action that leads to criminal behaviour on the part of one or more of his subordinates he will be clever enough to camouflage his own role.

That leads to the puzzling question as to why Mr. Jain was brazen enough to demand a bribe over the telephone (and that too the one which he normally uses). A person with even half the intelligence a CMD of a bank has (or presumed to have) would have a thousand other ways to ask and receive bribes if he wants to be corrupt.

It is also logical to think that the vice-chairman of a large corporate ‘negotiating’ a bribe with a senior executive of a nationalised bank would be more discreet."

The writer has subtly indicated that corrupt deals are normally transacted in a more recondite and esoteric manner so that the guilty will have easy escape routes. Those conversant with banking transactions tend to believe that corruption is very rampant.

Therefore, Narasimhan's conclusion that " However, their top executives certainly do not deserve to be tarred with the same brush just because of the alleged corrupt ways of one of them" strains our credulity.

It is more realistic to say that  honest bankers are not yet totally extinct."

The aftermath of demonetisation has brought to the fore the large-scale prevalence of bribery in banks (sadly, including the Reserve Bank of India). Axis Bank, in particular, has been shown to be extremely susceptible. There is no reason to hope that other banks are ethically more robust. Corruption in banks is rampant, endemic and disastrous. RBI and the government now have one more opportunity to test the corruption-index of various banks and to take remedial steps. However, if earlier experience is any indication, they will once again turn a nelson's eye to this toxin and carry on nevertheless.