Corruption in Banking - Addl Inputs
Below are the Issues, Root Causes and Solutions for Corruption in the Banking sector. Kindly review the and share any additional inputs you may have. We would like to submit this whitepaper to several Government stakeholders as well as regulatory bodies so corrupt practices can be addressed in this sector.
Transparency International India
Corruption in Banking – Solutions
1. Bank officers should be debarred from taking up jobs from companies having loan arrangement with their banks
2. All big compromise or write off proposals finalised by banks should be scrutinized by independent authorities
3. Transactions should be made more transparent
4. Time bound disposal of applications should be insured
5. The system should ensure free and fair methodology for the banking staff to execute their duties without the influence of high profile persons and politicians
6. Working of the CA firms should be closely monitored
7. All the paper work should be digitalised
8. Fixed metrics should be made for approval of loans
9. The nexus between the bank manager and property valuer should be broken
10. It should be made illegal for the agents to charge commission from the customers
11. If any bank employee is found flouting the rules, he should be suspended immediately
12. The bank officials should be made accountable for their decisions
13. The rules and regulations should be simplified so that they become easily understandable for the general public.
Corruption in Banking - Root Causes
1. Bank employees find loopholes to play with the rules
2. Bank officials take bribes to make extra money and don’t care if the bank loses money
3. Middlemen are used to ask for bribes so that the bank officials don’t get involved directly
4. Banks target needy customers who approach the bank and upsell to them forcefully
5. Small customers cannot pay bribes and hence the loan process is tough for them
6. The banking officials lack accountability
7. Honest bank officers are not able to perform due to pressure from other employees
8. Corrupt officials, usually in higher positions in the banks, often use their influence on junior managers to recommend such loans
9. The entire banking system is non-transparent
10. The rules and regulations are tough to interpret for the common man.
Corruption in Banking - Key Issues
1. Floating money in banks is being used by bank staff to invest in small finance companies privately to earn extra cash for themselves
2. Non-recoverable loans given by the government banks to known bad businesses (in exchange for kickbacks) eating away the huge profit of the banks
3. Asking for bribes for approving project loans is being done regularly. They usually name an auditor who tells the amount
4. They also pick flaws in the proposal to create a problem and then ask for the amount
5. Valuations for property is another area of corruption
6. The bank manager suggests the valuer you should approach. The valuer's fee has a cut for the manager. If you also do a deal with the valuer, your valuation and loan gets accepted faster
7. Banks give a locker only if we buy one of their policies or make a FD
8. Corruption also exists in posting /transfers at all levels
9. It has become a common practice among several banks that they route all paper work starting from Loan application filling to project report preparation to an agent, who will collect some fees as a percentage of loan sanctioned and the same is shared among that agent and bank officials
10. Bribe givers compete between themselves to offer bribe and corner loans with less or no collateral
11. CA firms develop relations with the bank’s credit officials and then exchange favours
12. Many branch managers provide cheque discounting facility without permission from Head Office or Divisional Office and get cheques deposited to improve their business
13. Banks verify and make loan process hell for agriculture and small consumer loans but large corporate loans are extended for chronic defaulters more
Transparency International India
Corruption in Banking – Solutions
1. Bank officers should be debarred from taking up jobs from companies having loan arrangement with their banks
2. All big compromise or write off proposals finalised by banks should be scrutinized by independent authorities
3. Transactions should be made more transparent
4. Time bound disposal of applications should be insured
5. The system should ensure free and fair methodology for the banking staff to execute their duties without the influence of high profile persons and politicians
6. Working of the CA firms should be closely monitored
7. All the paper work should be digitalised
8. Fixed metrics should be made for approval of loans
9. The nexus between the bank manager and property valuer should be broken
10. It should be made illegal for the agents to charge commission from the customers
11. If any bank employee is found flouting the rules, he should be suspended immediately
12. The bank officials should be made accountable for their decisions
13. The rules and regulations should be simplified so that they become easily understandable for the general public.
Corruption in Banking - Root Causes
1. Bank employees find loopholes to play with the rules
2. Bank officials take bribes to make extra money and don’t care if the bank loses money
3. Middlemen are used to ask for bribes so that the bank officials don’t get involved directly
4. Banks target needy customers who approach the bank and upsell to them forcefully
5. Small customers cannot pay bribes and hence the loan process is tough for them
6. The banking officials lack accountability
7. Honest bank officers are not able to perform due to pressure from other employees
8. Corrupt officials, usually in higher positions in the banks, often use their influence on junior managers to recommend such loans
9. The entire banking system is non-transparent
10. The rules and regulations are tough to interpret for the common man.
Corruption in Banking - Key Issues
1. Floating money in banks is being used by bank staff to invest in small finance companies privately to earn extra cash for themselves
2. Non-recoverable loans given by the government banks to known bad businesses (in exchange for kickbacks) eating away the huge profit of the banks
3. Asking for bribes for approving project loans is being done regularly. They usually name an auditor who tells the amount
4. They also pick flaws in the proposal to create a problem and then ask for the amount
5. Valuations for property is another area of corruption
6. The bank manager suggests the valuer you should approach. The valuer's fee has a cut for the manager. If you also do a deal with the valuer, your valuation and loan gets accepted faster
7. Banks give a locker only if we buy one of their policies or make a FD
8. Corruption also exists in posting /transfers at all levels
9. It has become a common practice among several banks that they route all paper work starting from Loan application filling to project report preparation to an agent, who will collect some fees as a percentage of loan sanctioned and the same is shared among that agent and bank officials
10. Bribe givers compete between themselves to offer bribe and corner loans with less or no collateral
11. CA firms develop relations with the bank’s credit officials and then exchange favours
12. Many branch managers provide cheque discounting facility without permission from Head Office or Divisional Office and get cheques deposited to improve their business
13. Banks verify and make loan process hell for agriculture and small consumer loans but large corporate loans are extended for chronic defaulters more
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https://scroll.in/article/859781/how-the-new-financial-regulation-law-will-affect-the-banking-sector more
Dec 06
All loans given should be scrutinised by auditors appointed by CAG on annual basis. Big loans 100%, small and medium on a % basis so that govt is proactive. Officers found guilty, there should be a provion of punishment including jail based for wilful neglect. Rewards should be given in promoting etc to the officers with clean records. Why not nationalised bank see how private banks keep their NPA low. more
Sep 08
Go to all bank executives who give home loans , the rules are so confusing that the bank can turn the loan down but if you grease the hands by paying 2% commission of home loan to the executives or agents the loan will be sanctioned.. who is responsible; the banks coxz the rules are so confusing in each city, instead of having only one plain rule that encroached / land in dispute will not have home loan they say that planning authority, this authority approval etc... the site is mentioned in this condition in 1920 records etc.. either we have to pay 2% or go to lenders like DHFL which will charge 1% interest above the market rate and compulsorily take property insurance more
Sep 08
Bank worker's unions are a strong unit and membership of the unions makes the worker indisciplined. PSB staff have strong union backing in their indisciplined behavior. The staffs are also well aware of the "flip" side of many officers and hence have scant regard for office discipline and efficiency. Many of the officers have come up from the lower ranks due to their Caste background and are not adequately well versed with the office rules. These officers/managers are mostly dependent on their accountants for the "credibility" of the loans requests. Many of these "reserved quota" managers, being less accomplished with the rules, are easy prey to the manipulations of the Head Office Managers and play accomplice to the 'machinations' of the Head office Manager. Most of these 'manipulated loans' end up as NPAs but the Head office Manager gets away from the taint because nothing is in 'writing'. Caste and community based reservations in the recruitment and promotions in PSB plays havoc with the efficiency quotient of PSBs and need to be phased out and PSB officers in the rank of RM and above should be debarred from taking up alternative employment within the clientele of the bank, after their retirement. more
Sep 08
