Post-PNB fraud survey: Public sector banks are corrupt but no better alternatives to bank on

Businessmen Nirav Modi and Mehul Choksi seem to have shaken people's faith in the public sector banks in the aftermath of Rs 12,600 crore (and counting) Punjab National Bank fraud. But the sad part of the story is that people feel- that they don't have any reliable alternative to escape "collusive corruption between businesses and staff at public sector banks".

In an online survey that received more than 50,000 votes by over 20,000 unique voters, people came up with several innovative solutions including the suggestion to deposit passports of the loan defaulters with the bank as collateral guarantee.

About 53 per cent people participating in the survey conducted by citizen engagement platform LocalCircles said corruption is "a norm" in public sector banks due to "business-banker nexus". Another 43 per cent, however, said that the case of corruption to favour businessmen were "limited" to loans and credit. Cumulatively, 96 per cent voters from across the country found 'corruption' as the common link between a loan seeking businessman and the public sector bank.

The public sector banks are facing humongous crisis of credibility as skeletons of scams are routinely tumbling out of the NPA graves. Cases relating to Kingfisher Airlines owner Vijay Mallay, Nirav Modi, Mehul Choksi, Rotomac owner Vikram Kothari, Bhushan Steel and Ruias are only a few examples that made headlines. But an average bank customer doesn't feel confident about options available in the banking market.

Responding to the questions with PNB fraud in backdrop, only 35 per cent participants felt their money is fully secure with the PSU banks. Yet only 16 per cent people plan to move their deposits to private sectors banks. Another 8 per cent said they would mull option of converting their deposits into gold or properties.

However, biggest chunk of 41 per cent participants said that they don't have any reliable alternative of the PSU banks to move their deposits to. This means, despite loss of apparent faith in the banking ecosystem of PSU banks, 76 per cent people are not prepared to move their money to private banks.

While the Reserve Bank of India and the finance ministry have set up panels to explore the possible ways to plug loopholes in the PSU banking system with many raising clamour for privatisation, the average Indian does not seem to be favouring this option.

Around 52 per cent said "effective vigilance system" is "the best solution to fix the state of PSU banks in India." Another 32 per cent said "privatisation is the way forward" while 13 per cent favoured "induction of top private sector professionals in senior management" of the PSU banks to fix the corruption bug in the system.

To prevent Nirav Modi-PNB fraud like scams, about 89 per cent said that the loans and credit extended by the PSU banks should be audited by external agencies. In response to another query, 97 per cent respondents said that the RBI should demand a report on the current status and risk type level for all Letter of Undertakings from all the PSU banks to gauge the actual health exposure.

Some of the measures that don't seem feasible but received substantial support from the people participating in the survey include seizure of passport as collateral for loan payment defaulters.

Around 67 per cent respondents said that loan defaulters should be made to seek release of their passport each time they travel overseas and that the banks can release the same on the basis of their account status.

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