Why did Indian Banks fail so miserably ?

Bank failure:

Every person remains very much concerned relating to his money things such as bad he should save the money which is the appropriate place to save his money concerns the person. This is the place where banks play their roles, bank is such a place which takes deposit from the customer, as well as functions loan to the customer. So are we familiar with the thing that before 1969 all banks were private, and government did not have any control over the bank,  and that time more than 700 banks were there which had failed or had liquidated their money. So in order to bring stability in the Indian financial sector and to meet the needs of development government had nationalized the banks after which 14 banks came under the control of government. So we hear this from a long time that various private and cooperative banks didn’t have money to give to their depositors which results in bank failure which is a very big issue for any country and its economy.

1. PMC BANK

The Punjab and Maharashtra Co-operative Bank generally known as the PMC Bank vishal given a loan of more than 25000 crore to a housing Development limited company, and to give this big amount as a loan 70% of the loan amount were from the deposits made by the customer, and to commit this fraud more than 21000 fake accounts were opened so that this could be shown that the bank had given loan to various parties whearas in the real scenario the bank had only given loan to a few parties only. Later actions were taken and the bank peomoters were arrested on a case of cheating.

2. YES BANK

So here we will need to understand what is a NPA?

Any person is unable his loan for 3 months then he is declared as an NPA. But more the NPA means the bank is good, but if a bank reports less NPA than the amount of NPA’s actually occuring them what kind of problem can arise we will discuss

So YES bank was India’s fastest and fourth largest bank in one time, and it was only due to the fact that where generally banks are used to target normal customers Yes bank used to target big companies such as insta mojo, phone pe, Bharat pe etc, but the downfall of YES Bank occurred when RBI issued a notice stating that there was more than difference of 3000cr in NPA’s. Loan to companies like Anil Ambani group were a major reason of high NPA’s.

When the under reporting of NPA came in light the RBI removed Rana Kapoor from the CEO position of Yes Bank.

3. Lakshmi Vilas Bank

 This bank was having issues such as bad governance non profit and high NPA.

So the major problem of this Bank started then this Bank had issued a loan of 700 crore to former Ranbaxy promoters. Later on this issue came into light that Lakshmi Vilas Bank had given this loan money as a basis of its personal capacity and had also misused the amount the people.

 So a few days back RBI had merged this bank with the DBS a foreign bank, and a Moratorium was applied for 30 days which meant that no new loans could be given for 30 days, and depositors could not withdraw more than 25000.

So, serious reforms are required so that transparency and accountability could be brought into the banking system. Banks have to balance between corporate loans and retail loans.

In India whether a private bank or a nationalized bank fails it is necessary for the government to intervene in between in order to save the banking sector, and the government subsidies this money through the tax payers money.

Therefore it is very necessary for the RBI to bring a strict framework so that the banking system remain transparent and accountable.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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