Bank Crisis Hits India, Many Accounts Wiped Out, People Left With Nothing

[Spaffin]

This is really a sad and uncalled miss happening in India where the banking sector has been witnessing worse things by the day over the last couple of years. The Reserve Bank of India kind of needs to be held accountable here too as they could've prevented this if they took the right actions when signs of a scandal like this seemed likely.

Then again, giving ₹25,000 as compensation is like throwing a nickel into a beggar's bowl which already had $5000+ stolen off of. I really hope these woes end with the accused on the run being put behind bars and the rightful people getting their monies back.

The current situation is really very scary, because the whole world knows how people live in India and what difficulties they endure.  It seems to me that it is necessary to pay attention to all problems in India not only to international organizations, but also to the citizens of India themselves need to take the initiative.  We have already seen in many countries how people can solve problems and force their rulers to correct many mistakes and solve problems.

[Zanzibet]

To be blamed most is the India's central banks failure to put monitoring mechanisms in place. learning from this incident they ought to tighten their rules.  This is a lesson that no investment is 100% safe be it crypto or not.

[alyssa85]

It may be rather ungrateful to evaluate the state of the Indian banking system on just one case, but it is strange that this bank managed to do things like this and was able to create 21 000 fictitious accounts to hide bad business. This shows us that actually control of the central bank failed in his work, or at least it was late to prevent financial malversations.

When asked why people still keep money in banks, most say that it is still the safest way (for them). And given the attitude of the Indian government towards cryptocurrency, I think it's hard to expect people to change their minds and turn to something else, especially towards Bitcoin, which is still too complicated for most.

In my opinion, any investment is a risk, but I think that keeping money in banks at times like this is an even bigger risk. In some countries (EU) state guarantees for the funds up to a certain amount, so even if banks fail the client is insured against loss.

This stuff is not unique - Wells Fargo of the United States also got caught making ficticious accounts and they got fined $100 million and had to pay back $2.5 million to account holders who were defrauded.

The only difference between the US and India is that the American authorities crack down heavily when they can (American prosecutors can make their name and then go on to run for state Governor if they can take down a big name, so they have a big incentive to make sure these types of frauds get prosecuted).

[clickerz]

This is really a sad and uncalled miss happening in India where the banking sector has been witnessing worse things by the day over the last couple of years. The Reserve Bank of India kind of needs to be held accountable here too as they could've prevented this if they took the right actions when signs of a scandal like this seemed likely.

Then again, giving ₹25,000 as compensation is like throwing a nickel into a beggar's bowl which already had $5000+ stolen off of. I really hope these woes end with the accused on the run being put behind bars and the rightful people getting their monies back.

This is really unfortunate that the institution you trusted your money is the one who robs you.This is intentional, a clear fraud by hiding their bad loans,creating fake clients,  to paint a good record so that they can attract more investors ad depositors. Hope people high ranking officials who where involved get punish and serve in jail.

This is also the reason  why  cryptocurrencies, become popular especially to the young.

[lobat999]

To be blamed most is the India's central banks failure to put monitoring mechanisms in place. learning from this incident they ought to tighten their rules.  This is a lesson that no investment is 100% safe be it crypto or not.

Absolutely! Not only the Central Bank of India is to be blamed but I guess the Government of India and all its regulating bodies that have failed to do their part should be blamed as well!

But on the brighter side, I assume the Indian Government will further strengthen and improve their regulations and learn lessons from this incident to prevent it from ever happening again in the future or at the very least minimize the possibility of its occurrence - thus making their banking system more robust to retain the confidence of its stakeholders.

[magneto]

Whether people realize it, similar scenarios are playing out across the world. Banks are becoming insolvent and adopting questionable unethical policies on their depositors in an effort to cover costs. This has been an ongoing theme for a long time. Something that has not necessarily been fully addressed even after the 2008 economic crisis. Like Paul Krugman said: "kick the can down the road" (leave the real problems for someone imaginary person in the future to fix).

Unfortunate for us, while mainstream media spams us with stories about bitcoin being a bubble. There is very little coverage on banks all over the world imploding and needing to be bailed out and saved from their own mismanagement and poor decisions. This has a tendency to give people flawed opinions on the effectiveness of state imposed regulation as well as the claimed stability and reliability of traditional financial institutions like banks.

This does feel like some sort of sick throwback to the 2008 GFC, doesn't it?

Banks investing in high risk high return assets for the sake of giving off the appearance of profitability, while ending up with toxic assets on their balance sheets which they grossly over-report in terms of their mark-to-model values... Sound familiar yet? Hmm... I wonder what could go wrong.

People seem to feel like bank insolvency would no longer be an issue after the strengthening of regulations after the GFC, but it is still very possible and even likely in some countries. And yes, you're right in pointing out how mainstream media seem to put no emphasis on this news while grilling BTC for absolutely no reason.

[meliodas]

This is the reason why I don't fully trust the banks even outside from the India. Even though there is a lot of people that keep on saying that the banks are safer than other type of storing our money, I don't follow their advice because I know that there is a possibility for them to just completely shutdown and that is the reason why I only put at least 3-6 months total of my monthly expenses in the bank and the rest of my money are invested in assets that are liquid enough to preserve my wealth.

[NathanJB]

But why should the media be exposing how the banks are incompetent? The banks are the most powerful entity in this world. They control governments, they can also control the media more easily. News will come out of banks' shady transactions and extreme failures when they are about to explode already and they cannot contain it anymore because sooner or later the public will still know.

[Ailmand]

One the reasons why banks are avoided by some people most fraud acts or stealing in banks comes way inside from the management it self. There had been a lot of issues within banks even in our country where some remittances or even funds from personal accounts of their depositors are being credited without them knowing and what is crazy about this bank employees would even show  that withdrawals had been signed that is why no disute can be done or the most common one would be banks delaying tactics where they would say they would investigate about it. Do not trust banks with your funds.

[Sithara007]

To be blamed most is the India's central banks failure to put monitoring mechanisms in place. learning from this incident they ought to tighten their rules.  This is a lesson that no investment is 100% safe be it crypto or not.

Absolutely! Not only the Central Bank of India is to be blamed but I guess the Government of India and all its regulating bodies that have failed to do their part should be blamed as well!

But on the brighter side, I assume the Indian Government will further strengthen and improve their regulations and learn lessons from this incident to prevent it from ever happening again in the future or at the very least minimize the possibility of its occurrence - thus making their banking system more robust to retain the confidence of its stakeholders.

I don't know how you can blame the government when this scam was perpetrated by a few high ranking bank official with no links to any of the political parties. I would rather congratulate the government for acting quickly and arresting the accused before they were able to flee to safe heavens (as many of the criminals have done in the past). The government also froze the stolen assets, so that the account holders could be reimbursed for their losses.

As per the latest updates, the government has recovered around 80% of the stolen amount and this will be reimbursed to the users sometime soon. And many of the scammers are likely to forfeit their own fortunes, in return for a milder punishment. Therefore I expect the victims to be compensated in the range of 90% to 100%, and here I would be rather praising the government rather than complaining about it.

[lobat999]

Absolutely! Not only the Central Bank of India is to be blamed but I guess the Government of India and all its regulating bodies that have failed to do their part should be blamed as well!

But on the brighter side, I assume the Indian Government will further strengthen and improve their regulations and learn lessons from this incident to prevent it from ever happening again in the future or at the very least minimize the possibility of its occurrence - thus making their banking system more robust to retain the confidence of its stakeholders.

I don't know how you can blame the government when this scam was perpetrated by a few high ranking bank official with no links to any of the political parties. I would rather congratulate the government for acting quickly and arresting the accused before they were able to flee to safe heavens (as many of the criminals have done in the past). The government also froze the stolen assets, so that the account holders could be reimbursed for their losses.

I guess I'll stand by my opinion to blame the  Indian government since I believe they have the duty and obligation to protect their citizens from this kinds of frauds in the banking sector even if they are not directly linked to that fraud. But unfortunately, India's regulating bodies and other Government entities with banking jurisdiction failed to prevent this incident probably because of poor implementation of rules and regulation in accordance with it accepted banking policies and standards.

As per the latest updates, the government has recovered around 80% of the stolen amount and this will be reimbursed to the users sometime soon. And many of the scammers are likely to forfeit their own fortunes, in return for a milder punishment. Therefore I expect the victims to be compensated in the range of 90% to 100%, and here I would be rather praising the government rather than complaining about it.

Is that so? If this is true, then I must commend the Indian Government for this swift action but I doubt the depositors will be compensated by more than 90 percent since the bank had already been drained with NPL and its depositors only have limited depository insurance but not unless the Government will intervene and absorb all the banks liabilities which I also doubt will not likely to happen.

Also, maybe you could provide us links to the latest updates for reference.

[ecnalubma]

In this kind of crisis people will begin to realize how important to have full control of their financial assets.This is the disadvantage of a centralized financial system and this is happening all over the world not just in india. This century old banking system needs an overhaul, blockchain based banking could be an answer.

[Lucius]

This stuff is not unique - Wells Fargo of the United States also got caught making ficticious accounts and they got fined $100 million and had to pay back $2.5 million to account holders who were defrauded.

The only difference between the US and India is that the American authorities crack down heavily when they can (American prosecutors can make their name and then go on to run for state Governor if they can take down a big name, so they have a big incentive to make sure these types of frauds get prosecuted).

The truth is that we cannot compare the banking system in India with that of the USA, especially bank supervision when it comes to this kind of thing. But generally, when it comes to banks, there are financial malpractices in almost every country in the world. We can remember the HSBC case, one of the strongest global banks which is caught in drug money laundering and terrorist financing, but instead of being banned (which was the intent of the US judiciary) they pay $2 billion fine and continued to work as if nothing had been.

If such things can happen, it only means that the supervision is not good enough, but also that those who should be watch about such things sometimes turn their heads to the other side for financial gain. I think the penalties for such crimes are insufficient, these are mostly fines and suspended sentences that actually encourages people working in the sector to do such things.

[audaciousbeing]

....


Whether people realize it, similar scenarios are playing out across the world. Banks are becoming insolvent and adopting questionable unethical policies on their depositors in an effort to cover costs. This has been an ongoing theme for a long time. Something that has not necessarily been fully addressed even after the 2008 economic crisis. Like Paul Krugman said: "kick the can down the road" (leave the real problems for someone imaginary person in the future to fix).

Unfortunate for us, while mainstream media spams us with stories about bitcoin being a bubble. There is very little coverage on banks all over the world imploding and needing to be bailed out and saved from their own mismanagement and poor decisions. This has a tendency to give people flawed opinions on the effectiveness of state imposed regulation as well as the claimed stability and reliability of traditional financial institutions like banks.

I don't think anyone could have been put any better. Banks all over the world are gradually facing difficult situations and its something that calls for concern. For me, I think most times its due to pressure from several quarters such as the central banks, the government agencies, bankers committee and even the general public as they have an expectation of them and the moment their reality does support such expected positions, they tend to come up with a creative way to ensure that is happening.

In a sane society, banks should not go under and if that would happen, there would have been a signalling effect because of the role the industry occupies in the economy. In this case, it is the fault of the central bank for them to have a situation like this in their hands for not seeing through the creative accounting that is being done by the management of the bank and eventually they have to take along the money of their customers who have trust them with their resources. Anyway, its a bank, government will always come through in other to salvage the economy.

[SaShiRaJaVu]

To be blamed most is the India's central banks failure to put monitoring mechanisms in place. learning from this incident they ought to tighten their rules.  This is a lesson that no investment is 100% safe be it crypto or not.

There is a big difference here, these things happen when you trust the centralized banking system where any individual decision can ruin your life savings and we have seen in this specific bank where the upper personalities responsible for good banking took advantage and gambled with the common man's money. If you trust bitcoin there is nothing to be worried but if there is a centralized coin then you need to worry.

[coinfinger]

This is good for them, I think they left things that they are meant to have tackled to avoid this, and was busy going against cryptocurrency which if they had adopted, I am sure would not have given rise to such thing, and at least, it would have saved 50 percent of lost fund. Right now, my money is divided into 50:50, one is saved in fiat in the bank and one is in my cryptocurrency wallet, both bitcoin and usdt.

Imagine that I was an Indian citizen, and among those that lost bank money, would I not have been able with something now through my cryptocurrency wallet, which there is even tendency that I could get the lost one back after bitcoin pumps to the last all-time high, but I wonder how they really reason, and they just want to keep the whole system to themselves when they know that they really cannot protect it.

[Vishnu.Reang]

From what I have heard, PMC is only the tip of the iceberg. People are not realizing that the real issue is with HDIL (Housing Development and Infrastructure Ltd). PMC Bank loaned around $1 billion to HDIL and it looks as if that amount is gone. And PMC is not the only bank that had exposure to HDIL. Other banks had also loaned huge amounts to HDIL.

[LeGaulois]

But why should the media be exposing how the banks are incompetent? The banks are the most powerful entity in this world. They control governments, they can also control the media more easily. News will come out of banks' shady transactions and extreme failures when they are about to explode already and they cannot contain it anymore because sooner or later the public will still know.

Banks are the most powerful? A lot of banks are in agony and on respiratory assistance from the Central Banks. Many don't sucess in the stress test. For years now, they're are fighting to reduce their cost to operate.  HSCB alone is in the process of firing 10k people.
There are some banks that now charge people to deposit money! Yes, you heard it right, you want to deposit the money you pay!

Banks are weak, more than before 2008! Statistics show than banks won't survive more than ~8 months if a big crisis happens, like back in 1929
 with the great crash

[ReiMomo]

I feel so sad about what happen to them the reason why I really don't trust bank because of that. We thought that our money is safe but look at what happens? All their money is gone so I would prefer to just invest in bitcoin rather than saving money on the bank that you are not sure if it's really secure.

Time will come that Bitcoin will the main currency and not a currency that regulated by our government, all things make decentralized and we have the freedom to store our valuable assets safe.

[aysg76]

Unfortunate for us, while mainstream media spams us with stories about bitcoin being a bubble. There is very little coverage on banks all over the world imploding and needing to be bailed out and saved from their own mismanagement and poor decisions. This has a tendency to give people flawed opinions on the effectiveness of state imposed regulation as well as the claimed stability and reliability of traditional financial institutions like banks.

The bank you talking about isn't nationalized bank. It is just a co-operative bank which functions very differently from commercialized bank. Co-operative banks generally lend and take deposits from their members only. So co-operative banks are not as secured as commercialized banks. I read somewhere that Indian Finance Minister has assured the clients of the bank that they will get their money back so situation is in control I guess. Also, there is enough media coverage about this in India so it is wrong to say that media doesn't expose deficiencies of banks. I remember reading online about the bank called PNB operating in India which was scammed by some Indian businessman and it was big election issue in India.