The Indian banking system passing through a very critical situation. It is a paradox that Government is constantly providing it budgetary financial support as working capital to carry on business on the other hand financial frauds are increasing in it eroding its stability and financial viability.
For the first time in the life time of 84 years of the Reserve Bank of India the Government is taking Rs.1.76 lakh crores from its surplus fund to provide financial help to public sector banks to carry on main business of providing loans to all the sections and sectors of the society.
But the Reserve Bank of India in its 2018-19 report has revealed that in the last financial year fraud cases in banks on the annual basis rose by 15 per cent increasing the involved amount up by 73.8 per cent of Rs.71,542.93 crores, while the Government is providing the financial support of 70,000 crores of rupees.
In the past with the fraud and non refunding the loans by Vijay Mallya of the Kingfisher Airlines lid on large number of bank frauds cases were opened. It revealed the top bank executives were hand in glove swindled the bank of lakhs of crores of rupees. The NPA rose so much that banks itself were on the verge of bankruptcy. The Government had to rush to save it from collapse.
Now banks fear in giving loans in the market economy and this has resulted crunch in money supply and very difficult situation trades, industry and commerce.Recently many industries are facing crisis and making retrenchment of staff due to sluggish trade activities.
In textile sector the services of 2 lakh workers were laid off. Instead of increase in employment potential the country is facing rise in unemployment. The Government has to take the recourse to taking over funds from the reserve and surplus funds from Reserve Bank of India.
In this financial while it is taking 1.76 lakh crores rupees and in the coming three years it will take 4.5 lakh crores rupees in installment. In loan management the banks were able to trace, locate some cases to recover the funds treated as NPA (Non Performing Assets). It were able to recover such total blocked funds by 9.1 per cent and its lending capacity increased by 60 per cent.