The recently occurred PMC Bank scandal is an eye-opener on several fronts. Not only is it an alarm bell for the Govt. and RBI but also an eye-opener to the general public.
The RBI needs to understand that its going to be held responsible for the failure of our financial institutions, they have to either own up their banks and NBFCs, or come out and explicitly declare the institutions they cannot handle as such, so that people won't place their trust in such institutions like PMC Bank and Yes Bank.
This staying silent and speaking between the lines is a very dangerous game they are playing. No doubt that co-operative banks have gone bankrupt before too (such as the famous Madhopura Bank scandal in Gujarat) but now is a different time, people are more aware of their rights and they don't want to be taken for a ride any more!
On a recent NDTV show, a panelist suggested that RBI come up with a grading system for institutions with gradations like A, B and C (or green, amber and red), and they should explicitly declare that the C/red zone is a gone case and RBI won't be responsible for them at all.
Even now, RBI went for a very diplomatic posturing. An ex-RBI serviceman recently pointed out that a PMC board member was also a former HDIL board member (thus conflict of interest), and RBI had written to PMC several times about this and recommended against that member's inclusion to the board. The RBI says that's all they can do without a direct control in management. But on the other hand, they are not even shredding off their responsibility on co-op banks. Why not come out and explicitly say that we aren't responsible for any co-operative banks at all? This will sort out the problem as no common citizen will ever risk putting their money in them.
And speaking of common citizens, they need to be smarter too! You can't expect the RBI or govt. to protect you for every single financially incorrect decision you take. Co-operative banks were created with a specific purpose which was to fund the co-operative societies like Amul and the Sugar co-operatives of Maharashtra - it was never intended for commoners to open their savings accounts in the first place!
And yet, why do they go and open their accounts in these banks despite knowing this? Just for a few extra percent interest on savings and fixed-deposits? Common sense tells you that more returns never come without more risk. If only people adhered to common sense, most of their problems will be automatically solved.
It pains me to see my fellow countrymen act in such a gullible manner, hand over their hard earned money to thugs like PMC Bank. But these are very bad times we are living in, the responsibility is placed on the gullible to become smart, not on the wrong-doers who defraud the gullible.
How do you think the financial system of our country should be reformed? Please let me know in comments.
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