A healthy economy would sustain only with a further improvement to these and a place where people can completely trust the banking channels again.
The health of any economy is directly related to the financial status of its banks. Generally, people are led to believe that banks are the best place to protect their finances, yet it is evident from recent events that this is not always the case.
The lending business comes with its own risks and only making technological changes might not be the only thing needed. A constant revision and check may also help.
Mobilisation of resources and their better allocation by commercial banks play an important role in the development of both underdeveloped and developing economies.
About a month ago, Punjab & Maharashtra Cooperative Bank (PMC Bank) suddenly collapsed. It had Rs 11,500 crore in deposits from more than 3,00,000 people and had lent more than Rs 6,500 crore to bankrupt real estate group HDIL Ltd.
In another case, Kingfisher Airlines borrowed around Rs 9,432 crore from 13 different banks up till February 2018. State Bank being the biggest lender, lent around Rs 1,600 crore followed by PNB with Rs 800 crore, IDBI with Rs 650 crore, and Bank of Baroda lent Rs 550 crore to the company.
Every year, especially in the last 3 to 4 years, India has heard one or two such scams where either one or multiple banks are the victims or culprits of such incidents. These scams can appear in many different forms, targeting the experienced and the novice. The domino effect that this starts off also affects the economy and the growth rate drastically.
Even the most modern banking systems can fall prey to such largescale financial scams. Research done on an international scale has shown that in most of these cases, there has either been lack of supervision by regulatory authorities or collusion between the bank employees.
The banking channels have come a long way and have only been improving with each passing year. A healthy economy will sustain only in a place where people can completely trust the banking channels
(The Author is Head of Research at CapitalVia Global Research Limited – Investment Advisor.)Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.