Positive and negative Impacts of Banking Scams on Indian Economy

A number of studies and reports exist on bank frauds. There appears to be no positive effect on Indian economy from the Bank scams. A brief of view of, how such scams damage the economy and steps taken to manage it effectively to improve upon the system are as follows -        

Post liberalization period, Indian economy has witnessed several scams. These scams have just not led to the loss of millions of Rupees but also effected the economy in a major way. The scale of these economic crimes and the way in which these crimes have been committed are of a serious concern to the Government and to people as well.      

Financial or Banking scams have never been a rare phenomenon in economy of any country. However, India has witnessed a plethora of these unwanted aliens over the past 3-4 decades. Economic offenders by engaging in various illegal trade practices and by way of scams have swindled off billions of money and have exploited all areas of economic activity.     

With large consequences of failures as a result of banking scams, an unofficial freeze on lending by petrified (frightened) bankers may be counter-productive for many businesses. The rising perception of Public Sector banks as a nexus of corruption is becoming more like social obligations to be underwritten by tax payers. It is time for the government to create effective measures in view of the economic prudence of the country rather than working reactively. 

Bank scams cause a dis-balance in the economy often leading to weakening of the market. This causes a slowdown in economic growth often disappearance  of foreign investment as well. Scams often revolve around making such deposits in the banks, solely to churn their black money into white. Sometimes, banks give away to individuals/institutions way above the paying capacity. Such actions often prove to be harmful to the banks in the long run. Similarly, associate business executives fraudulently wire cash to a private account at an associate offshore bank and it takes a bank a month or perhaps more to track the missing funds. 

Though banks and banking scams might not be new but repercussions of a scam are widespread these days. Earlier, limited number of people, mostly the rich, had dealing with the bank but in the past one or two decades, banking services have also been availed by even the poorest of the poor in India. Thus, when a bank scam is discovered or a bank collapses, the whole public sentiment goes down with it. 

It turns out that we don't need to be really clever in the Indian system to make away with a billion dollars. Some of the banks have antiquated systems that are not adequate to stop rogue people from committing fraud.  The worry is that the systems are not adequate to prevent rogue dealers, rouge employees to colluding and making off with the stuff. 

With the creation of healthy and positive environment at workplace the temptation or desire of committing fraud can be reduced. Timely justice delivery is welcoming to efficiently combat fraud. Thus, banking sector should and ensure preparedness for such fraudulent practices.

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