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Q.3 What are the reasons for the high prevalence of scams in the banking industry in India? What are the implications of such scams for the economy? Suggest the way forward. (10 Marks)

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Mentor’s comment-
  • https://www.thehindu.com/opinion/op-ed/the-scam-faultline-is-damaging-indian-banking/article65628245.ece
  • In the intro, mention that the RBI’s Financial Stability Report released in December 2021 projects the rise of gross NPA to 8.1% in Sept, 2022.
  • In the body, mention the reasons for the scams such as poor lending practices and inside work, involvement of junior and mid-level management, insufficient due diligence etc. In the implications mention the impact on every persons of the country, weakening of the market, reduced investment in the economy etc. In the suggestions mention tightening of internal and external audit systems of banks, fast rotation of employees of the loan department of the banks, setting up of internal rating agency by the public sector banks, implementing effective Management Information System, use of AI etc.
  • Conclude by mentioning that while the Government of India and the RBI have taken several measures to try and resolve the issue of scams in the banking industry, there is still a long way to go.

Comments

8 responses to “Q.3 What are the reasons for the high prevalence of scams in the banking industry in India? What are the implications of such scams for the economy? Suggest the way forward. (10 Marks)”

  1. chandan mahabaliah Avatar
    chandan mahabaliah

    Payment Id: pay_Jleaaqb12Iv40R

    1. Staff @CD Avatar
      Staff @CD

      Chandan

      Introduction is fine.
      Reasons are fine, but too much explanation is given for few points, try to include more points- poor lending practices and inside work, involvement of junior and mid-level management, poor bank corporate governance etc.
      Although flowchart in next part is good, try to keep it neat and clean otherwise it will be wasted. Impact on citizens in the form of convenience fee etc can also be mentioned.
      Way forward is fine, improving internal governance system of banks, use of technology, putting in place a rating system for projects before sanctioning loans etc can be mentioned.
      Try to address all parts with equal importance.
      Keep practicing. 🙂

  2. Pranav Shirke Avatar
    Pranav Shirke

    id 216516833611

    1. Staff @CD Avatar
      Staff @CD

      Pranav

      Good attempt. Both the content and structure of the answer are good.
      Introduction is fine. Causes mentioned are also comprehensive. Poor corporate governance in banks can be mentioned too.
      Implications are fine, you can also talk about the convenience fee applied on common citizens by banks to recover their losses.
      In way forward, use of technology(MIS); putting in place a rating system for projects before sanctioning loans etc can be added. Other points are good. Conclusion is fine.
      Keep practicing. 🙂

  3. Apurva Bomble Avatar
    Apurva Bomble

    Gs3

    1. Staff @CD Avatar
      Staff @CD

      Apurva

      Good attempt.
      Content and presentation both are good.
      Introduction is fine.
      Reasons mentioned are also good. However, lending to corporates and poor bank corporate governance are two different things, you can mention them separately. While poor corporate governance, means poor management and control inside banks, improper lending happens due to lack of due diligence and nexus between borrowers-lenders. Lower convictions under Indian laws, safe havens in foreign countries ( Mallya, Choksi etc) can also be mentioned.
      Implications and way forward are good, you can also talk about putting in place a rating system for projects before sanctioning loans in way forward.
      Conclusion is fine.
      Kee practicing. 🙂

      5.5/10

  4. believing is seeing Avatar
    believing is seeing

    JmQPOijgofaERD

    1. Staff @CD Avatar
      Staff @CD

      Hello

      Introduction is quite generic, you can give some examples of the recent scams in banking sector or mention the NPA data to make it better.
      Excessive use of flowchart is there, use it but try to write some parts of the answers in points also unless there is very much shortage of time and space.
      Causes mentioned are fine. Involvement of junior and mid-level management, poor bank corporate governance, lower convictions under Indian laws, safe havens in foreign countries ( Mallya, Choksi etc.) can be mentioned.
      Implications are fine, you can also talk about the convenience fee applied on common citizens by banks to recover their losses.
      In way forward, use of technology(MIS); putting in place a rating system for projects before sanctioning loans etc can be added. Other points are fine.
      Conclusion is decent.
      Keep practicing. 🙂

      3.5/10

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