A tale of irony and betrayal
When you think about taxpayers, they’re the lifeblood of a nation, funding its progress and development. However, in India, taxpayers have paradoxically become the unintentional architects of the banking sector’s downfall. How? By electing politicians who treat Public Sector Banks (PSBs) as personal piggy banks and ignoring glaring signs of systemic corruption.
This is a story of wilful negligence, audacious scams, and systemic exploitation. It is a cautionary tale that intertwines politics, economics, and ethics, spotlighting how an apathetic public and a complicit elite systematically destroyed the backbone of the nation’s economy.
Why Did India’s Banking sector Fail?
What Happens when political cronies run Banks?
The management of PSBs in India has often been handed over to individuals with little or no expertise in finance. The United Progressive Alliance (UPA) era provides a glaring example: 32 out of 37 independent director positions across banks were filled with Congress loyalists. These appointees, often career politicians or party activists, lacked the technical know-how required to govern complex banking operations.
One egregious example is Punjab & Sind Bank. Former CMD R.P. Singh disclosed how politically appointed directors influenced asset recovery decisions to favour defaulters. According to Singh, pressure from these directors prevented the bank from auctioning distressed properties, forcing them to accept settlements at drastically lower values.
This wasn’t just a one-off case. Across PSBs, directors pushed politically favoured projects and waived off loans to gain personal or party benefits.
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How did Bankruptcy Laws Fail to Deliver?
The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 was supposed to revolutionise debt recovery. While it helped streamline insolvency proceedings, it often favoured large defaulters over creditors.
- Case Study: Bhushan Steel owed over ₹50,000 crore, but the debt was settled for just ₹35,200 crore—leaving a haircut of nearly 30%.
- The Bigger Picture: Haircuts in IBC cases range from 40% to 90%, turning it into a "settlement scheme" rather than a recovery mechanism.
Meanwhile, the SARFAESI Act, designed to empower banks to seize assets, has largely been ineffective due to bureaucratic delays and legal loopholes. The biggest beneficiaries? Crony capitalists and politically connected industrialists.
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Who are the key beneficiaries of India’s Banking collapse?
Why do Defaulters always seem to escape?
India’s most notorious defaulters have one thing in common: they’ve either fled the country or are living comfortably abroad.
- Vijay Mallya: The "King of Good Times" owes ₹9,000 crore but resides in the UK, appealing extradition orders.
- Nirav Modi: The diamond magnate behind the ₹13,000-crore PNB scam is fighting extradition from London.
- Mehul Choksi: Nirav Modi’s uncle, wanted in the same scam, is enjoying a luxurious life in Antigua.
In each case, the lack of swift legal action allowed these defaulters to move their wealth offshore and escape justice.
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What Role Did Politicians Play in This Mess?
The UPA government’s strategy of populating bank boards with loyalists is a textbook example of cronyism.
- Notable appointments Include:
- Krishna Mohini: Ex-MLA from Solan and Mahila Congress vice-president, appointed to Punjab & Sind Bank.
- Rani Satish: Former Congress minister for Kannada and Culture in the SM Krishna Government. Now president of the Karnataka Pradesh Mahila Congress Committee. Assigned to Union Bank of India.
- Harcharan Singh Josh:A student trade unionist leader. In charge of Manmohan Singh’s 1999 election, placed on Punjab & Sind Bank’s board. Member of the National Commission for Minorities.Was earlier Secretary of the Minority Department of the AICC.
- MN Kandaswamy, INDIAN OVERSEAS BANK. Member, AICC
- Umesh Kumar Sharma - PUNJAB AND SIND BANK. Former General Secretary of the Haryana Pradesh Youth Congress and general Secretary of the District Congress Committee in Sonepat.
- KK Sharma - PUNJAB AND SIND BANK. Former AICC Secretary, attached to Congress Working Committee member Mukul Wasnik. Is also an AICC member.
- Kamal Mann- PUNJAB AND SIND BANK. A Mahila Congress leader from Haryana is also a member of the AICC. A relative of former Haryana Minister. Tejinder Pal Mann.
- Vinay Kumar Sorake - SYNDICATE BANK, Former Congress MP from Kamataka. Lost elections in 2004
- Shobha Ozha, SYNDICATE BANK. Former general secretary of the Congress party's National Students Union of India and Indian Youth Congress, now president of the Mahila Congress in Madhya Pradesh.
- Nirmal Khatri - UCO BANK. A former Congress MP from Faizabad, is presently a Secretary in the AICC.
- Omen Moyang Deori - UCO BANK. From Arunachal Pradesh, special invitee to the Congress Working Committee.
- Abdul Rashid - UNITED BANK OF INDIA. District Congress Chief of Ambikapur in. Chhattisgarh.
- PC Zoram Sangliana, UNITED BANK OF INDIA. Former Minister from Mizoram, has been an elected member of the AICC for decades and General Secretary of the Pradesh Congress Committee of Mizoram.
- Praveen Davar-UNITED BANK OF INDIA. Another old-timer at the AICC headquarters is presently, Secretary of the AICC's ex-service- men cell. Has also been AICC General Secretary and part of its media cell.
- Mansoor Ansari- UNITED BANK OF INDIA, Congress leader from Jharkhand, member of the Jharkhand Congress Committee and the Jharkhand Pradesh Congress. Also member of the PCC's Pradesh Election Committee.
- Paban Singh Ghatowar, UNITED BANK OF INDIA. Congress MP for four terms from Assam, former Union Minister of State for Health and Family Welfare and Deputy Minister for labour
- Anusuya Sharma - UNITED BANK OF INDIA. Former office bearer of the Uttar Pradesh Pradesh Congress Committee.
Once in power, is it possible that these directors prioritised political agendas over financial prudence? What we definitely know is that loans were sanctioned to unviable projects linked to political allies, while recovery efforts were actively sabotaged.
How Did Taxpayers Contribute to this Crisis?
The irony is painful. Taxpayers not only funded these banks but also footed the bill for their failures. Each time a loan was waived or written off, the government recapitalised PSBs using taxpayer money.
- Shocking figures:
- Loan write-offs between 2014 and 2023 exceeded ₹14 lakh crore.
- Over ₹3.5 lakh crore has been infused into PSBs since 2014 to cover losses.
What Are Non-Performing Assets (NPAs) and Why Are They Rising?
What are the root causes of NPAs?
Non-performing assets are loans that remain unpaid for over 90 days. While some NPAs result from genuine business failures, the bulk stem from wilful defaults and political interference.
- Case in point: Kingfisher Airlines, owned by Vijay Mallya, defaulted on ₹9,000 crore despite repeated warnings from banks. Political pressures reportedly delayed recovery actions, allegedly allowing Mallya to shift assets overseas.
How Do NPAs impact the Common citizen?
Rising NPAs drain a bank’s profitability, limiting its ability to lend. This results in:
- Higher interest rates for borrowers.
- Reduced availability of loans for small businesses.
- Lower returns on savings and fixed deposits.
What is the Human Cost of White-Collar Crime?
Why is White-Collar Crime More Dangerous Than Violent Crime?
Unlike road rage or a robbery, white-collar crime is calculated, far-reaching, and insidious.
- Economic Devastation: The losses affect millions, from senior citizens who lose savings to farmers denied credit.
- Moral Decay: It sets a precedent where crime pays, undermining the rule of law.
- Betrayal of Trust: The banking system, built on trust, crumbles when people lose faith in it.
White-collar criminals like Nirav Modi are no less dangerous than violent offenders—they just wield pens instead of weapons.
How does the educated Class Enable this Crisis?
Are educated voters to blame?
The educated middle class often views politicians as service providers and industrialists as heroes, ignoring the ethical lapses of both. This mindset allows corrupt leaders and crony capitalists to flourish unchallenged.
Why do Bank Employees Get Pay Hikes Despite losses?
Public outrage often focuses on employee salaries, and not without reason. In 2021, PSB employees received a 15% salary hike, even as banks reported cumulative losses of ₹15,000 crore. While front-line employees bear the brunt of public anger, the real culprits—mismanagement and political interference—remain unscathed.
Can India Fix its Broken banking system?
What needs to change?
- Merit-Based Appointments: Bank boards must be composed of finance experts, not political appointees.
- Stringent Recovery Laws: Strengthen the IBC and SARFAESI Act to ensure defaulters face swift penalties.
- Accountability: Hold politicians and bureaucrats accountable for their role in creating NPAs.
- Transparency: Regular audits and public disclosures can prevent misuse of funds.
Lessons from Global Banking Crises
What Can India Learn from Other Countries?
- US Financial Crisis (2008): Stringent regulations like the Dodd-Frank Act were introduced to curb risky lending practices.
- Iceland (2008): Unlike India, Iceland jailed its bankers, setting a precedent for accountability.
The Road ahead: Rebuilding Trust
Restoring India’s banking system will require more than reforms. It demands a cultural shift—one where taxpayers, voters, and policymakers prioritise ethics over expediency.
Final thoughts
India’s banking collapse is a reminder of what happens when power goes unchecked. It’s time for taxpayers to demand accountability—from politicians, bankers, and themselves. After all, a country is only as strong as the integrity of its citizens.
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Tushar Mangl is an energy healer, vastu expert, and author of The Avenging Act. He writes about personal finance, investments, and the art of balanced living.
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