Demonetization has turned out to be a big disaster. I write this on 28-12. Lot's have been written on this subject. Adam Smith said something insightful about the man of the system.
Modi has tried to be the man of the system and has failed.
On 15 September, the Central Bureau of Investigation (CBI) registered a case of corruption against Archana Bhargava, a former chairperson and managing director (CMD) of United Bank of India (UBI), after the agency carried out raids at multiple cities and recovered cash, jewellery and investment of over Rs13.5 crore. Allegedly, Bhargava had abused her official position, first as an executive director (ED) of Canara Bank and later as the boss of UBI for making money for herself and/or for a company in New Delhi, owned by her husband and son.
The CBI has raided their homes and the State Bank of India has initiated an internal enquiry into the bribery charges leveled by the investigating agency against Shyamal Acharya, deputy managing director of SBI and KK Kumarah, former assistant general manager, in what is now being called the Rs 400 Cr bribes for loans graft case.
Typically, a corrupt boss uses senior executives such as general managers and deputy general managers for sanctioning loans to undeserving borrowers and pockets a small portion of the loan amount. It could vary from 0.5% to 2-3%, depending on the profile of the borrowing company. This means for a Rs100 crore loan sanction, the “earnings” could be Rs50 lakh to Rs3 crore. The money could be paid in cash or in an overseas bank account (one banker is known to keep this money in his own bank overseas, through the so-called hawala route).
Our analysis of large value frauds (greater than Rs. 50 crore in value) has thrown up some interesting conclusions like an inordinate delay in declaring the accounts as fraud (Annex 2), covering too many officials in the probe, holding junior officers responsible for frauds etc. We have also observed that in frauds in consortium/Multiple Banking arrangements, while some banks do not find any staff accountability, several others do the opposite(Annex 3). Our analysis also suggests that out of 719 officers who were found accountable in 230 large value fraud accounts in the banks over a period of time, 426 officers were up to the rank of Senior Manager, 196 officers were Chief Managers and AGMs, 94 officers were of the rank of DGM, GM and CGM and only 3 Officials were from the Top Management and the Board of Directors. This statistic highlights the skewed nature of our punitive vigilance process and its tendency to focus on the lower level functionaries. Another factor which greatly erodes the efficacy of the vigilance function is the disconnect between the punishment meted out and the offence. We observe that in public sector banks, most of the officials found liable were let off with minor penalties- caution, warning, censure, stoppage of increments for limited period etc. which sends out a wrong message - a message about passive tolerance rather than active intolerance towards misconduct! Incidentally, private and foreign banks operating in India adopt a no- nonsense approach as reflected by the quantum of penalties imposed for similar misdemeanours including dismissal from service.