Online Classes :- Current Affairs Part-3

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No witch hunt of our bankers, please

The compulsion on the government to act tough and to be seen to be acting tough in the wake of large cases of bank fraud is real and understandable. So far, the summons to and examination of senior bankers have been civil and respectful. These things should stay this way.

The authorities should firmly guard against fraud investigations degenerating into an ever-expanding witch hunt against the banking fraternity that ends up paralysing banking in the country at a time when credit growth is picking up and some green shoots of investment recovery are visible.

While discussing misconduct in banking, especially in the public sector, it has to be borne in mind that there are both structural distortions that affect everyone and individual culpability in the case of those who succumb to the temptation to make personal gains at the expense of the institution in which they work.

Government ownership facilitates the presence of board members who owe their position to patronage rather than professional expertise. Personnel of the department of financial services and politicians occupying the finance ministry or those closely associated with them could have undue influence on decision-making.

Public sector bankers, at the senior level, are seriously underpaid, compared to their private sector counterparts. The bond market plays a fraction of the financing role it should ideally perform, leaving even medium-term infrastructure to bank loans. When infrastructure financing decisions are taken by a clutch of bankers, it is not uncommon for inflated project costs to get sanctioned, and for a portion of the ensuing loans to end up lining the pockets of project developers and their political backers.

Absence of a transparent system of political funding makes it imperative for politicians to mobilise resources through such means. It is imperative to address these structural defects, if banking is to be rid of a systemic bias towards fraud. That is a tough task. It is easier to pretend that deficient moral fibre is a general trait of Indian bankers. Bending to convenience would be unfortunate.

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