In times of vulnerability

It has been an excellent week of hearty tidings for Indians at large and Bengalis in particular. Economist Abhijit Banerjee did us proud by grabbing the Nobel and our very own, the Dada of Indian cricket was anointed BCCI Chief. But with good news often comes the bad. Woeful stories of the deaths of three helpless depositors of beleaguered Punjab and Maharashtra Co-operative Bank (PMC Bank) also emerged. The death of the 51-year-old man who first lost his job at Jet Airways in April, only to lose his savings in the PMC debacle was particularly heart-breaking.

The PMC has Rs 11,500 crore garnered from 300,000 depositors. It had extended loans to the tune of Rs 6,500 crore to Housing Development and Infrastructure Ltd (HDIL). In fact, over 73 per cent of its loan book featured HDIL, a listed real estate company that is facing bankruptcy proceedings. The PMC had claimed to be operationally healthy and seems to have hoodwinked its own board, auditors, and even the Reserve Bank of India (RBI). Is it really so easy to fudge accounts and fool even the central bank for such long periods of time? Or is it rather emblematic of the lackadaisical processes at play that allow white-collar crooks to simply get away with it?

It's only when the RBI put withdrawal limits for depositors did the rest of us even sit up and take notice. The banking sector is reeling under non-performing assets (NPAs) and while the PMC Bank crisis may not start off a trend of banks folding up, there are real concerns that are in the mind of the common man. Is our money still safe in banks? There was a time when this was a rhetorical question. Stock markets were unpredictable, gold prices could go up or down, assets face depreciation but one's savings were as snug as a bug in the banks' coffers. Today, however, many of us worry about the safety of our life's earnings that we have been gradually building up. Defaults by IL&FS, DHFL and now the PMC Bank scam have blown the lid off a looming domestic financial crisis.

Remember, how panicked we felt during the dark days of demonetisation when we weren't allowed to gain access to our own money? Now think of hundreds of PMC depositors who stare at the reality of losing their savings unless the RBI and the government intervene to sort this matter out. And there is worrying news of other banks as well that are going through gloomy times with falling share prices. Such instances deeply affect the credibility of the Indian banking system. More significantly, it creates an air of distrust and panic among customers who feel they are left in the lurch.

Cooperative banks may not be under the aegis of the finance ministry, the banking regulator is surely to blame, past governments may have been incompetent or complacent — but the truth today is that the onus is on the current dispensation, whether they like it or not, to reinstate the credibility of the Indian banking sector. Sectoral policies that boost the banking sector are welcome but surely, there must be a way to safeguard the interests of the banks' customers. The deposit insurance guarantee scheme of 1961 that was enhanced to Rs 1 lakh from Rs 30,000 way back in 1993 is too little in amount and ineffective in action.

A joke reached me earlier this week. An ordinary person sought a loan from a bank which, in lieu of collateral, provided the loan. The bank customer paid back the loan with interest and continued growing his business. Looking at his steady success, the bank approached him to deposit money in the bank. The person then asked the bank for collateral. A joke indeed and we may be far from that day in India but representative of a sordid state of affairs.

(Shutapa Paul is an author and media entrepreneur. Views expressed are strictly personal)