With cash low and tempers high, bankers seen as banksters

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26 Aug, 2025 12:21

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M SaraswathyMoneycontrol

A little over a month into the demonetisation drive, bank employees appear to have become the lightning rods for irate depositors having to stand in long queues at banks to get their money.

Fueling public fury are news reports of some bank officials conniving with black money holders to help exchange old currency notes for new, and opening fake accounts to help them launder money.

So far, 4 employees of HDFC Bank and 19 employees of Axis Bank have been suspended for unauthorized exchange of old notes and creating fake accounts.

But such illegal activities are happening across banks—state-owned and private--say people in the banking industry as well outsiders.

And that is not all. There is talk about how some bank managers have been “leasing out” counting machines after banking hours to black money holders who have large sums of unaccounted cash.

In addition, the massive rush at every bank branch means that a lot of counterfeit notes too have been deposited, in some cases, with the help of a complicit banker.

“In many cases, officials—junior and senior—are taking calculated risks, betting that the unprecedented load on the system will ensure that it will be a long time before fraudulent activities are traced back to the concerned bank branch,” a person with knowledge of the industry told Moneycontrol.

Read more: RBI not giving enough cash to PSU banks: Staff union leader

Take for instance counterfeit notes. In many instances, bank officials have been unable to do a thorough check of every single note because of the sheer quantum of deposits.

The money is then loaded into currency chests and sent to the Reserve Bank of India. It remains to be seen if RBI has the resources to vet every single note that has come to them over the last month or so.

“If the RBI detects fake notes, it will immediately debit the account of the bank from which it has received the notes,” said the person. “The bank will then have to conduct an internal audit to check which branch is responsible, and at that particular branch, which official is responsible, and if there was any malafide intention. Even then it is difficult to trace which account holder had deposited the notes,” the person said.

Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services says that for some bank employees who knew the internal systems and its loopholes well enough, there was an opportunity and they used it.

“Now, the challenge is for the banks to track them down,” he said.

At the same time, bank employees say the acts of a few black sheep are maligning the entire community, which has been putting in long hours since demonetisation was announced on November 8.

“There is a genuine shortage of cash; why is nobody questioning the RBI on how much cash is being supplied to banks on a daily basis and what is the basis of the allocation,” said an employee at a private bank, adding that there has been no communication from the RBI on when the cash supply will return to normal.

The All India Banking Employees Federation is claiming that the RBI is favouring private banks at the behest of bureaucrats.

But private sector bank officials have a different story to tell. They say the government is favouring the top public sector banks by giving them more cash.

“If somebody is unable to withdraw money from a state-owned bank, that will be seen as a failure of the government, so most PSU banks have adequate cash, compared to private banks,” said a bank employee.

Then, there is also the allegation by a section of the industry that the government machinery is trying to deflect the blame on to banks to cover up for the botched implementation of demonetization.

The most common complaint has been that rules are being changed frequently without any thought to the difficulties of executing them at the ground level.

“Banks are being hit from all sides,” says an official, adding “the currency shortage is made out to be the handiwork of banks, and there has been huge productivity and business loss because there has been no work happening other than deposits and withdrawals.”