‘If you owe the bank 100,000 dollars, the bank owns you. If you owe the bank 100 million dollars, you own the bank.’
This old Wall Street saying brings to mind the dangers of corruption, nepotism and cronyism in the banking sector. Often ignored, corruption in the financial services sector can have deep and far-reaching consequences for an economy, and in an increasingly interconnected world, the entire globe. This has been brought into sharp focus since the 2008 crisis and its aftermath, which included interest rate rigging, money laundering and tax evasion.
In India, corruption in the financial services sector has been in the media spotlight in recent years, with Indian banks labouring under the burden of growing columns of non-performing assets (NPAs) and bad loans. While the government seeks to address issues of debt recovery by way of undertaking an overhaul of existing laws, enforcement actions are bringing to light the corruption in the system and how bank officials have been sanctioning loans to undeserving borrowers. Further, in the past year, regulators have also been closely scrutinising the performance of the top management at banks, which has led to upheaval in the banking industry (and in particular, at private sector banks).