Shady practices in the banking sector under the strict vigil of the central bank

Banking system is the bedrock of development for any economy, and what happens in the banking sector is directly related to what happens in the economy as a whole, and the panic button has been pressed quite a few times in the recent past by the markets to clean the banking system and revisit the policies that govern it in order to ensure the depositors interest is safeguarded and the money which is kept flowing in the market or hoarded by an individual or a group of individuals sighted as NPA can be revitalized for recovery and the money can be accounted for. RBI has been playing a pivotal role as the central banker to all the banks and the government operating in our country, and this has been triggered by the unfortunate incident at the Punjab Maharashtra Co-operative Bank (PMC Bank) as was reported a few months ago where they under-reported the bad loans that they incurred and thus blatantly disregarded the depositors safety with the sole purpose of benefitting a family by issuing them non-securitized loans in huge numbers.

This issue has been highlighted because not only the smaller banks are a part of the cleanup regime, but all the big banks as well have been taken to task regarding the under-reporting of bad loans to make their books look more legible and investor-friendly which apparently is not the case at least with the State Bank of India (SBI) as the bank under-reported Rs 11,392 crore worth of bad loans in the financial year which was also the figure for the divergence in the net Non-Performing Assets (NPA’s) the bank later told the exchanges where it is listed for trading.