The book offers an interesting insight to a common thread among the different banking scams that have happened since 1957. Though one could have followed each scam in greater depth, it is worth reading this book to understand the rise and fall of personalities and organisations, looked up to as cults.
Authored by V Pattabhi Ram and Sabyasachee Dash, the book has an interesting style of dialogue between a senior and two young family members as they discuss about the scams. The nitty-gritty of events and its timeline, key loopholes and resolution are depicted in detail. In the first section, the authors present the accounting and regulatory aspects of banks and the corporate world. This makes it easy for the reader to understand the technical details. Considering this, the book is recommended for the youth and will help them to understand how scams develop.
Of government, banks and suspicion…
The great bank robbery instances start from Haridas Mundhra LIC scam in 1957, the first, post – independence. Followed by this is Nagarwala scam in 1971. Both these cases connect political circles and associated suspicions. The book briefly presents one of the most stunning scams involving Harshad Mehta highlighting the failure of the banking system and how a manipulator with an attractive demeanour drove the valuations of the share. Once it was unearthed, the fall of the market showed the depth of the scam. The authors highlight the circuit trading of Ketan which shows how one can use the flaws in regulatory monitoring leading to erosion of investor confidence and loss of savings in large retail investors and institutions. The IL&FS and DHFL scams bring to fore the mismatch of fund availability and deployment tenures, naturally leading to misappropriation and fudging of accounts. Later, the PMC scam shows the natural flaws in audit practices and the ability to malign and wilfully shore up performance indicators.
The book shows how it is difficult to sniff scams much ahead of time and to nip it off in the early stage. The readers can see interesting positions the book takes on the need for surveillance and proactive management of trade, investment, and banking.
Need for further research
The authors throw light on the need for research on inappropriate practice and regulatory surveillance. These have been the cause for repeated scams in the financial sector especially involving the banking systems. The web of subsidiaries, related party transactions, and buying/booking revenue through a series of sales across subsidiaries are considered genuine problems for auditors to sniff trouble.
The authors have addressed the issues using the four pillars: auditors and their practice limitations, the role of independent directors, rating agencies, and the RBI as the central bank responsible for maintaining healthy financial systems. Though some solutions have been suggested, the authors have clearly pointed to their limitations too. A reader may wonder that as long as humans and money are involved, greed would exploit the system.
In the concluding chapter, the authors visualise the scope of technology to address this issue. It does seem lucrative to take the approach but it leaves a question if the economic divide will drive greater number of smaller robberies and imperfections?
The authors quote from the ancient Indian way of managing public good. As buyers beware, investing community must be on their toes. But compulsions at all levels make decisions contextual, and in hindsight, one can find a hole in any resolution.
This book will be useful to understand the need to hold high professionalism. Management and higher education institutes can use this to understand the ethics required in finance.
