Bank Frauds in India

Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Prelims and Mains focus: about the frauds in Indian banks: causes and link to slow growth

Context: Banking frauds have been rising. During the first six months of this fiscal, frauds of Rs.1 lakh and above, as reported by commercial banks, touched Rs.1.13 trillion. This, after frauds worth Rs.41,167 crore had been reported in 2017-18.

By how much have bank frauds risen?

• As the above chart shows, total bank frauds reported in 2015-16 stood at Rs.18,699 crore. In a matter of four years, they have jumped more than six-fold. By the time we get around to the end of this fiscal, the amount involved in frauds would be Rs.1 trillion higher than in 2015-16.

• An important distinction needs to be made here. As the Reserve Bank of India (RBI) Master Circular on frauds points out, “It has been observed that frauds are, at times, detected in banks long after their perpetration." What this basically means is that frauds reported during the current fiscal didn’t necessarily happen during this year.

Why has there been a jump in bank frauds?

There is no straight answer to this. But as John Kenneth Galbraith wrote in The Great Crash, 1929: “At any given time there exists an inventory of undisclosed embezzlement. This inventory—it should perhaps be called the bezzle—amounts at any moment to many millions of dollars. In good times, people are relaxed and trusting, and money is plentiful... (so) the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression, all this is reversed." As per this theory, bank frauds have been building up over the years and there has been an explosion in their recognition this year.

What’s the link between frauds and slow growth?

Growth during the first half of FY20 fell to 4.8%. According to Galbraith, the rate of discovery of what he calls bezzle rises in a depression. While India’s economy is nowhere near a depression, it is in the middle of a slowdown. This is why fraud recognition has increased. A rapid build-up in fraud recognition doesn’t mean the system has turned more corrupt this year.

Why has there been a build-up in fraud?

The frauds being recognized now were committed earlier. Why was there a jump in fraud at all? As Urjit Patel, RBI governor from September 2016-December 2018, said in a speech in March 2018: “Indeed, RBI data on banking frauds suggests that only a handful of cases over the past five years have had closure, and cases of substantive economic significance remain open. As a result, the overall enforcement mechanism… is not perceived to be a major deterrent to frauds relative to economic gains from fraud."

What does this tell us about bank frauds?

The RBI top brass has openly talked about big businessmen siphoning off money from different projects. This was money they had borrowed from banks to finance the projects. Such incidents haven’t been properly investigated over the years and have led to these people defaulting on loans after siphoning off the money. This has only incentivized fraudsters to become bolder. Only proper investigations leading to convictions can stop this practice.

Syllabus subtopic:

• Awareness in the fields of IT, Space, Computers, Robotics, Nano-technology, Bio-technology and issues relating to Intellectual Property Rights.
• Achievements of Indians in Science & Technology; Indigenization of Technology and Developing New Technology.

Prelims and Mains focus: about GISAT-1: its orbit and significance; about Gaganyaan; ISRO

News: Indian Space Research Organisation (ISRO) is preparing to launch GISAT-1, a new earth observation (EO) satellite, in the first week of March 2020.

About the satellite

• GISAT-1 — Geo Imaging Satellite — will be the first of two planned Indian EO spacecraft to be placed in a geostationary orbit of around 36,000 km. It will apparently be in a fixed spot looking over the Indian continent at all times.

• All Indian EOs have been placed so far in a 600-odd-km orbits and circle the earth pole to pole. GISAT-1 will be launched from Sriharikota satellite launch centre.

• With this satellite, which has high-resolution cameras, scientists can keep a constant watch on India’s borders, monitor any changes in the geographical condition of the country, etc.

Syllabus subtopic: Conservation, Environmental Pollution and Degradation, Environmental Impact Assessment.

Prelims and Mains focus: about the proposal of notifying as a tiger reserve: arguements for and against; about NTCA

News: The Wayanad Wildlife Sanctuary (WWS), though home to more than half the number of tigers present in Kerala, may not be notified as a tiger reserve as the proposal lacks public support.

Background

The ‘Status of Tigers in India’ report released in 2019 had estimated the tiger population of Wayanad as between 75 and 80 individuals. Periyar Tiger Reserve, the first one in Kerala, has an estimated population of 30 to 35 big cats, whereas Parambikulam, the second reserve, has a population of 20 to 25 tigers.

Proposal rejected

• The attempts of the Kerala Forest Department to push forward the proposal for notifying the sanctuary as the third tiger reserve in the State came a cropper at the recently held State Wildlife Advisory Board. Citing the public resistance against the earlier attempts, the board rejected the proposal.

• Piloting the Wayanad proposal, the department officials pointed out that more than half of the tiger population in the State was found in Wayanad. There were five tiger reserves in the neighbouring States that share boundaries with Wayanad.

Arguements put foward in favour of the proposal

The arguments of the officials that the notification would ensure financial aid from the Centre and the National Tiger Conservation Authority (NTCA), better conservation and management of the tiger population and help generate more employment opportunities failed to impress the State authorities.

Arguement against the proposal

• Kerala Chief Minister, who chaired the meeting, flagged the issue of human-wildlife conflicts in the district. Referring to the public protests that were staged in Wayanad earlier against the proposal, the CM expressed concern over the possible impact of the proposal. Any such proposal should be implemented only after holding wide public consultations.

• Cattle lifting by the ailing tigers and their straying into human habitations had often triggered widespread public protests in the district. The department had to backtrack from its earlier attempts to notify the reserve following stiff public resistance.

• There were speculations that the notification would bring in stringent restrictions on development activities in the district, though the department tried to counter the campaign.

Support from NTCA

• Each year, the NTCA supports the tiger reserves by funding the proposals put forward through its Annual Plan of Operations. The authority also supports the reserves for implementing the tiger conservation plan.

• While Periyar Tiger Reserve gets an annual support of around Rs. 9 crore, the Parambikulam TR gets around Rs.6 crore from the authority.

Kashi Mahakal Express

Syllabus subtopic: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Prelims and Mains focus: about the train: route, significance etc; about jyotirlingas

News: PM Modi flagged off the latest religion-themed train, the Kashi Mahakal Express in Varanasi, the PM’s constituency.

Details of the train

• The Lord Shiva-themed train connects, for the first time, places related to three jyotirlingas—Omkareshwar near Indore, Mahakaleshwar in Ujjain, and Kashi Vishwanath in Varanasi.

• The commercial run of the thrice-a-week train will start from February 20. Railway PSU Indian Railway Catering and Tourism Corporation (IRCTC) will be running this as the third “corporate” train after two Tejas Express trains.

• With a side-upper berth converted into a permanent puja place or “temple” complete with pictures of Lord Shiva, incense sticks, flowers et al, waiters dressed in traditional UP-style attire and a vegetarian menu, the train leaves virtually no stone unturned to play to the theme.

• The train will cover 1131 km between Varanasi and Indore via Lucknow and a distance of 1102 km between Varanasi and Indore via Prayagraj (Allahabad) in approximately 19 hours. The route of the train will be via Sultanpur – Lucknow/Prayagraj – Kanpur – Jhansi – Bina – Sant Hiradnagar – Ujjain – Indore and back.

• Railways says that there has been demands from devotees for a train like this. The overnight train, which is a collection of 15 upgraded 3-AC Humsafar type coaches, is also IRCTC’s first overnight, long-distance train to run on a regular basis.

• Apart from selling tickets to the train, IRCTC has also worked out packages that involve taking pilgrims on all-inclusive tours of Kashi Dharshan, Ayodhya, Prayag visit, trips to the jyotirlingas (temples) including hotel stays and the like. There will be packages for cities and religious sites covered by the train such as Kashi, Omkareshwar, Mahakaleshwar, Bhopal, Sanchi, Ujjain, Bhimbetka, Ayodhya and Prayag. The packages, designed into various durations, cost between Rs 4950 and Rs 12450 per person.

• The train’s fare is Rs 1951 between Varanasi and Indore. After 70 per cent of the seats are booked, there will be an increase of 10 per cent for the next 20 per cent of the tickets and a further increase of 10 per cent for the last 10 per cent of the tickets in the dynamic fare scheme. Each ticket comes with a Rs 10 lakh life insurance cover free of cost and every coach is fitted with six CCTV cameras for security along with two guards.

• Like its other two Tejas trains, this train will also not entertain any of the concessions on fare offered by Indian Railways.

Another religion-themed train to be launched

This Lord Shiva-themed train will be followed by a Ramayan-themed train to be launched next month from across India in a big way, marking Indian Railways’ major push in the religious tourism segment. The Ramayan Express will touch places related to the mythology of Ram, including Ayodhya.