State control has enabled rather than prevented massive frauds
Indian banks are being hit with one disaster after another. They are already dealing with a bad-loan problem that’s close to a crisis—and which caused India’s largest bank to declare a quarterly loss for the first time since the beginning of the millennium. Some of the loans that have gone bad—such as those to the flamboyant liquor magnate Vijay Mallya—already had terrible optics and were being investigated by various regulators as well as the police. The latest fraud allegation is of eye-popping scale: Punjab National Bank (PNB) has reportedly admitted that a well-connected jewellery czar connived with bank employees to fraudulently acquire credit guarantees worth over $1.8 billion. That’s eight times the bank’s annual earnings.