Not that Vijay Mallya’s loan fraud was in the minds, while Sahara, Unitech, JayPee and others too remain in the fray, the Diamond Czar Nirav Modi, who is now treading in deep waters, is yet another blow to not just to the banking industry, but also the economy.
While the ED and the CBI are probing the Letters of Understanding issued by Punjab National Bank to foreign Indian banks, who raised money from foreign market, the amount being revealed is tuned at Rs 11 Lakh Crore.
It is not just the PNB, who has faced the risks, while there are other banks too like the Indian Bank, Canara Bank, among others which will set the ball rolling to the chain effects of the overall loss of money posted by the second largest Indian public sector bank.
The central government has planned to pump in Rs 2 Lakh Crores over a period of 2 years in the banking sector, restricting the activity to public sector banks only, while the private banks under the NPA burden will have to service their loans all by themselves.
This is phenomenon which has also triggered the heavy selling the stock markets of various banks, and India’s largest general insurer, Life Insurance Corporation of India, which is set to loose Rs 1400 crores in the aftermath of the disclosure of the fraud, as it owned a stake in the banks, as well as the Gitanjali Jewels the company of Nirav Modi, and his maternal uncle Mehul Choksi.
The LoUs ave underestimated the banking sector and have brought to the fore the lack of efficiency and accountability as the Indian public sector banks since the dawn of nationalisation, have been marred with a lack of professionalism, while rampant administrative discretion has again robbed the common people of their hard-earned money.
While both the Congress and BJP are not facing each other on the issue, the majority of the LoUs that have been issued or renewed, have happened in 2017 . This does not imply anybody’s influence as of yet, but the administrative efficacy is absolutely absent.
The brunt of added 11 L crores, will eventually be borne by the taxpayer’s money, if Mr NiMo fails to repay the amount. Also, if by surname, one might wish to find the proximity between NiMo and NaMo, then there aren’t many except the fact that they belong to the same state, and the same caste.
While the entire gamut of events seems to be one mired in more webs, the only thing that remains clear is the effects that the event will have in the coming days on the economy.
The banks which have come in the fold, will be at peril, and the taxpayers and the investors will loose confidence. It will affect the investments while at the same time slow-down lending.
To amend the scenario, one would need a bail-out in terms of stake sale for PNB and a fresh investment in LIC. The investments will have to be foreign to ensure buoyancy in the markets.