Home Economy Evolving anatomy of scams in India

Evolving anatomy of scams in India

Even if the country doesn’t evolve socially and politically, economy is evolving and so are the scams with it.

Hitting the headlines within a week, the Nirav Modi and Vikram Kothari scam has brought out a pandora’s box of bad loans of big businessmen that become non-performing assets for the banking sector. Also in sharp focus again is the connection between big businessmen and politicians which has allowed the businessmen to defraud banks and flee from the country.

Reports of a whistleblower having approached the Prime Minister’s Office in 2016 with a complaint regarding the scam and photos of Nirav Modi with the Prime Minister Narendra Modi at the World Economic Forum in Davos in January this year has put the spotlight on the highest office of the government for not doing enough to stop the scam, if not being involved in it any which way.

These scams have brought out a gravitational shift in which we have to now interpret these scams in the modern globalised economy.

Scams in India are like an organism. It is evolving itself genetically with the shape and pace of the economy. Earlier the scams were broadly based on:

  1. Commission-based scams – Bofors, Jeep, Delhi jal board scams
  2. Allocation of rights and tariff-based – 2G spectrum, Agusta Westland chopper scam, Delhi Power scam, Delhi CNG scams
  3. Ponzi scams – Noida Ponzi scam, Shraddha group financial scam in West Bengal, Srijan charitable trust-based scam
  4. Government welfare scheme scams- Siphoning of money during the conduit and not reaching the beneficiary. For example, National Urban Livelihood mission scam, Maharashtra scholarship scam, flood relief scams.
  5. Recruitment-based scams

The most important aspect in the evolution of the scam is that earlier the responsibility could have been fixed on the public representative as they were accountable under a certain ministry to look into the matter.

Most of these earlier scams were either at the ministry and government department’s execution level or were directly siphoned by  collecting money from the public like the Ponzi scams referred above. So the accountability at the government level was clear.

Now, the gene of scam has modified itself to the survival of globalization, like the Panama papers and Paradise papers. There is often this clamour of bringing black money of people stashed in banks abroad.

Scams are hitting the banking sector with quite an alarming regularity as the non-performing assets grow year-by-year. Moreover, many businessmen, who are not able to pay back the loans they took from public-sector banks, are running away abroad to escape the arms of law- be it Vijay Mallya, Nirav Modi and Vikram Kothari now.

This recent development in the genesis of the scam is such that money is easily siphoned off without any allocation of funds and without the burden of collection of funds in the “name of loans”. The genetic quality of these types of scam is that the beneficiary in the government gets the benefit without any defamation.

The money is easily siphoned off in the name of growth and development of the country and in the name of promotion of economy, so that the private sector may generate prosperity and employment. Like Mallya’s kingfisher did – projected to the country as the harbinger of growth in the airlines sector.

The safest aspect of this evolution is that the politicians are safe without their name cropping up and yet they are able to execute these scams nicely. The scammer is then sent abroad to settle and deposit money in their accomplice’s account.

The question then is why the hell democracy exists with the representatives chosen by the public- to serve the people or serve the scams?

In modern parlance of public relation in politics, no politician can be easily pin-pointed as a culprit. The scams are done with the help of the existing system from behind the scenes and with finesse. Then it is easily compensated by using public money in the banks, just by a mere accounting process.

Connected to various sectors, banking is a vital part of the economy and if these scams associated with loan defaults don’t stop, it will be disastrous for the economy. Remember the 2008 global financial meltdown because of the collapse of banking sector in US?

These banking scams have also brought focus on the role of internal and external auditors of banks. Proper auditing can help in the pin-pointing where the accused or the faults lay while the scam took place.

A constitutional body like the Comptroller and Auditor General of India (CAG) unearthed a lot of scams like the 2g scam, Coal block scam, CWG scam during the UPA 2 government, which became one of the primary reason for its downfall.

CAG is now for non-banking purposes. The question facing us is do we need a constitutional body or a body accountable to Parliament or a Parliamentary committee to look into these issues of NPAs and bad loans?

Though the Enforcement Directorate investigation will put more light on the auditors’ role or lack of it in the Nirav Modi case in due course of time, prima facie, this lack of accountability and lack of institutions that can hold people accountable for the banking scams is a worrisome headache for the Indian economy right now.

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