It is absurd, the rapidity at which scams are unfolding in the banking sector. We barely have time to catch our breath from the NPA scam, when NiMo hits us. Followed rapidly by Rotomac. God knows what else lies hidden in the vast mess that is is our banking system. Short of capital, short of management talent and very very short on integrity.
One of the more ironic jokes that crossed my whatsapp, was the picture of a cheap pen chained to the tellers grill to prevent it from being pilfered by a customer. And talking about pens, how does a banking system justify an exposure of Rs 3000 crores to a single pen manufacturer, when the size of the entire writing instruments (as pen manufacturers prefer to be called) market in India in 2014 was less than 250 crores.
And the diamond trade in India, as everyone knows is mostly a money laundering and havala operation..and now banking products have been devised to enable and facilitate this. You can get both pre shipment and post shipment credit for illegal money transfers now. You can hedge the currency risk with forward contracts or options, on all of which banks make a nice commission, thank you very much. And let’s not even go into letters of undertaking. For those of you who are curious on how this works, here you go:
If you are a worthy customer, you can walk into your friendly neighbourhood bank in India , and request them to guarantee a loan of a couple of billion dollars from a bank in let’s say Hong Kong. Your friendly neighbourhood banker types up something on a typewriter which you present in Hong Kong and presto you have a couple billion dollars in your bank account. One would think, that there would be some sophisticated verification processes in place in both banks to make sure that the letter of undertaking is properly authorised, executed and accounted for. But no. They are mere details.
What happens when the loan of a couple OD billion dollars falls due for repayment. No problems. You go back to you friendly neighbourhood bank in India and ask them for a fresh letter of undertaking and you are off again.. it is simple, and it works. Or at least worked till NIMO shit hit the proverbial fan.
Now w e don’t know how much of this is there. And where?
If you are a worthy customer, you can walk into your friendly neighbourhood bank in India , and request them to guarantee a loan of a couple of billion dollars from a bank in let’s say Hong Kong. Your friendly neighbourhood banker types up something on a typewriter which you present in Hong Kong and presto you have a couple billion dollars in your bank account. One would think, that there would be some sophisticated verification processes in place in both banks to make sure that the letter of undertaking is properly authorised, executed and accounted for. But no. They are mere details.
What happens when the loan of a couple OD billion dollars falls due for repayment. No problems. You go back to you friendly neighbourhood bank in India and ask them for a fresh letter of undertaking and you are off again.. it is simple, and it works. Or at least worked till NIMO shit hit the proverbial fan.
Now w e don’t know how much of this is there. And where?
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