Behind the Scenes: How Big Clients Exploit Bank Laws and Practices

I, myself a former banker, have observed firsthand how big clients like Vijay Mallya and Narendra Modi manipulate bank systems. This article delves into the unclosed loopholes within bank laws and practices that have been exploited by influential figures to secure preferential treatment and attention.

Overview of the Issue

In the banking sector, branch managers are often incentivized to target big clients, such as Vijay Mallya and Narendra Modi. When a branch manager secures a high-profile account, they receive substantial benefits, including quick client acquisition and easy promotions. This system, however, often leaves small clients struggling to receive adequate service, while the focus remains on a select few large accounts.

The Grooming of Large Accounts

When a big borrower like Vijay Mallya is courted, the benefits extend far beyond individual branch managers. The Branch Manager is seen as a gatekeeper to these high-value accounts. To manage a high-profile account such as Mallya's, a branch manager can simply forward the proposal to the regional or zonal office. This swift and effortless process contrasts sharply with the arduous task of acquiring and servicing numerous small clients.

Loopholes in Bank Laws

The case of Vijay Mallya and other big clients like Nirav Modi often involves multi-bank consortium accounts, where the lead banker (such as SBI in this case) canvasses the account and distributes the business and risk among his colleagues. This collective approach ensures that every involved banker benefits from the account, making it challenging to pin the blame on any single individual if the account eventually fails.

Blurred Accountability and Risk

In small accounts, the branch manager bears the full responsibility and accountability. However, in case of a large consortium account, many officers at various levels are involved. As a result, it becomes nearly impossible to assign accountability to any individual since the burden is spread across numerous qualified and experienced professionals. This makes the situation risk-free for individual bankers and thus, encourages further exploitation.

Behind the Scenes: Political and Bureaucratic Involvement

It is worth noting that the exploitation of these loopholes often involves a range of political figures, bureaucrats, and other key officials, acting in the background. The lack of accountability in such high-profile cases can lead to a win-win situation for all involved parties, further encouraging the exploitation of these loopholes.

Conclusion

The exploitation of bank laws by influential individuals is a complex issue with deep-rooted causes. Understanding these loopholes and the systematic incentives that promote their exploitation is crucial for the improvement of the banking sector. With increased transparency and accountability, it is possible to curb some of the inherent exploitation and mismanagement.