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  • Category: Miscellaneous

    Corruption in banking

    All these days I am of the opinion that level of corruption in banking sector is less. But of late what I understand is the banking sectors is also full of corruption.
    Floating money in banks is being used by bank staff to invest in small finance companies privately to earn extra cash for themselves .Kickbacks are being accepted to sanction loans to known bad businesses. Bribes are also taken for approving project loans. An auditor will be a middle man in this bargain. Bank officials also harass the people who come with proposals and take money from them
    Some bank managers suggest valuers to the client for their valuation. These people value the property at a higher level and loan will be sanctioned. In this process the bank official will get benefited. Corruption is there in all levels including postings/ transfers.
    I don't really known whether it is true or not.
    Learned members can post their comments on this issue.
  • #608153
    The author came to know the corruptions very late. Every bank would be having considerable amount of cash to be dealt with in the morning hours and that is the rule too. But when you present a big cheque for payment, the cashier wont give cash and instead ask you to come after banking hours. What happens that some considerable amount is sent to the market for the daily financiers who will see that by 4 pm the bank gets its money and also with some reward for the employees who cooperated. This is happening where the petty sellers are more concentrated. Like the push cart fruit vendors, vegetable sellers and small time business traders. All these people would need cash to participate in the auction in the morning and that time the bank would finance them and by the afternoon they make their sale and return the money to bank with profit , of course the middle man taking their cake and employees getting their share.
    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #608163
    Though the thread contains some points which are due to the lack of deep understanding of banking operations.the thread author is absolutely right when he says "I am of the opinion that level of corruption in banking sector is less.".
    Just recall all the years of your experience in dealing with banks; had you to pay even a paisa unaccounted to the bank or its staff any time for any normal service rendered? Generally not at all.
    There could be mistakes, delays and dilly-dallying and even inefficiency. But none of them are for reasons of expecting any favour from the clients.
    The system of working and the statutory and mandatory rules and stipulations are such that the avenues for corruption are prevented to the maximum. Even the system and procedure of recruitment in banks are such that an employee is placed beyond the level of temptation with reasonably good emolument, good working ambience and reasonably good career growth. (Though the salary and other facilities are now almost same like other sectors, earlier bank staff was having a slightly higher level of salary and perquisites).
    The main operational transactions especially with cash are open and transparent. Everyday's transactions have to be finished and daybook drawn the same day. The net balance cash has to be physically counted and tallied reckoning the day's transactions.
    If at all some kind of cash outgo happens as alleged and doubted in #608153, then that is just suicidal risk undertaken by the concerned employee.
    Usually, in any sector, corruption occurs at the point of dispensing discretionary services. In a bank branch, there are no discretionary services except the financial sanction of loans and overdrafts. Hence, the chance of corruption, if at all happens, as hinted by the above posts can happen at that point. However in these days of myriad choices, when banks are also under pressure to lend, normally and normal clients will not have such experiences. If corruption happens, then the client is also equally responsible. They may be falling preys to their habit in dealing with other sectors or they may be ignorant, or they may be having some deficiency vis-a-vis the essential requirement.

  • #608165
    Sadly, every sector in India is vulnerable to corruption, i'm not sure the level of 'internal auditing', 'checks' and 'governance regulations' that exists in the public and private sector banks. In the process of making additional revenue people resort to unethical or questionable practices.

    I would be surprised if any tax payer or PAN card holder in India has gone a week without getting a solicitation for a loan from a major Indian bank. Why would this even happen.. ? targets, ?pressure to perform ?? incentives.
    The common man has to procedure a bagful of documents to get a loan of 5-10 lakhs, yet well connect people get thousand of crores of rupees.

    Lastly the term " non performing assets - NPA, the bane of Indian banking crisis is nothing but a fancy term for systematic corruption at a high level in many cases..

  • #608166
    With reference to this thread, I would like to give a more relevant correct positions and facts on certain statements made in the thread as well as response above: My version is with reference to nationalised banks in particular.
    Presumption 1: Floating money in banks is being used by bank staff to invest in small finance companies privately to earn extra cash for themselves

    Fact and correct position: Only an authorised cashier is allowed to handle physical cash in banks. Only a reasonable and small amount of cash is paced at his/her disposal for starting and continuing transactions. The cashier logs in with his bio-metric and/or other authorised identity. Any transaction in bank goes through the system and authorisation by two officials. At any point the supervisor as well as the cashier can know the status of cash at hand. Bank has system of surprise checking, if needed, cash counter by authorised inspection officials.
    So if any unrecorded cash is allowed to go out of the cash cabin, then that is almost equal to suicidal action by the cashier. If by rarest of cases, such thing happens, that person should not be allowed to function. Even public is responsible to catch such a person, because bank is dealing with public money.(System and his own nemesis will definitely catch up with him and he will be caught and punished)

    Presumption 2: An auditor will be a middle man in this bargain. Bank officials also harass the people who come with proposals and take money from them.

    Fact and correct position: Most of the loans individuals avail do not need any papers or document requiring expert advice. It is just simple and plain that a prescribed application has to be filled up and the required supporting documents like income proof, security details, quotation or estimates etc are to be attached. For small proprietary and partnership business also their own office accountant staff can do the needful. Even for big corporate they have their own accounting and financial departments who can handle the matters and give necessary documents and papers. Big loans are sanctioned at higher level of authority after they are scrutinised by various lower layers. Banks also have to comply to various statutory terms and stipulations. So delays can happen. They need not be seen as deliberate harassments. (I am not competent to contest, if anyone had a rare different experience;)

    Presumption3: Some bank managers suggest valuers to the client for their valuation. These people value the property at a higher level and loan will be sanctioned. In this process the bank official will get benefited.

    Facts and correct position: Banks have a panel of approved valuers. They are selected and empanelled by a system of selection considering various parameters including their standing, reputation and integrity, approval by government and other authorities etc. One valuer can be in the panel of more than one bank also.The valuers lso have certain basic parameters. If anyone does wrong valuation,to the detriment of banks and clients, then the banks may remove them from the panels. Most banks also have a system of the branch manager's own independent assessment and valuation from his own independent sources. They should reasonably match except for technical accuracy. Nowadays there are ready reckoners for such things in major cities given out by the technical chambers and bodies.

    Presumption4: Corruption is there in all levels including postings/ transfers.
    Fact and correct position: Recruitment, transfers and promotions in bank personnel is within the Bi-partite system agreed upon involving the bank management and the employee's trade unions. There is maximum transparency and norms for the same. The personnel are regularly transferred to prevent any vested interest developing. That is one very important check to prevent corruption in banks. Within an office itself, the staff are not allowed to handle one department or section for long periods, They are periodically rotated.

    To sum up,bank personnel also are from the same society we all live in. So there can be different type of people and some of the negative happenings in the society in general could also be found in banks also. However because of the various systems and checks in place, the corruption in banks is very minimal and limited only to certain points. The public at large is not affected by that menace. Even those rare cases would be found by the various systemic checks and culprits caught , due process of law brought in for dealing them.

  • #608167
    @ 608153:"Every bank would be having considerable amount of cash to be dealt with in the morning hours and that is the rule too. But when you present a big cheque for payment, the cashier wont give cash and instead ask you to come after banking hours."

    Banks do not keep and not supposed to keep huge amount of cash overnight. There is a stipulation threshold considering the normal every day cash incoming and outgoing and also considering the security aspects. There is also a ratio in relation to the branch business. So when someone requires large amount for certain special needs, the bank has to be intimated in advance. Then such amounts are brought in either from the currency chest of that bank itself at other places or from any other bank with which there is arrangement. The bank has to comply the stipulations with regard to security and insurance guidelines.


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