The whole point of these posts on economic fraud, stock market scams, and the misuse of investor/depositor money is to expose the crony capitalism that has been the norm in socialist India. It may sound like an oxymoron but it’s true!
These scams have not come up in the era of economic liberalization post 1991…but in fact have been exposed to a greater degree now. There has always been a lack of regulation in the financial system…but now because of more openness and international exposure the government has been forced to clean-up the system.
In the socialist era, government-controlled banks, government-financed institutions (IFCI, IDBI, UTI), and the Life Insurance Corporation have been playing with investor/depositor money at their whim. Until now they have not been obliged to reveal their financial deals or balance sheets or loans, either to the public or even to the regulator. The reasons they could get away with this were the archaic rules of the past under which, loan default (by companies) was not a crime and deals were covered by the client confidentiality principle.
It was quite a revelation reading a series on the loans in the 100s and 1000s of crores taken by the companies that willfully defaulted. This journalistic expose was done by the Indian Express newspaper in 2002 and was titled the Great Indian Bank Robbery—it may be available on their website now.
It revealed a nexus between promoters, politicians, bank and financial institutions managers to loot the money of investors, depositors, and worse even taxpayers—and all this in the acclaimed socialist era. Thus it is called crony capitalism under a thick cloak of socialism!
It is thanks to economic liberalization that these financial crimes are being exposed and the need for transparency in matching up to world standards is keenly felt. But even today while the Reserve bank of India has a list of defaulter on its website, no big names can be seen there…the nexus continues since this information can only be revealed by the banks that have given the loans.
