Dear Prime Minister, Can you stop my Tax Money being looted by Industrialists through Banking System

Dear Prime Minister, accept my congratulations for having shown muscle to Pakistan yesterday and to prove that India is not to be taken for granted. I am sure your Seena (Chest) is now not 56inch but at least 112inch

My Query to you is that can you show similar will power against the corrupt industrial sector and banking sector against looting the public money. Today, an estimated sum of Rs 3 lac crore is lying with various defaulters. You can check how many more Mallyas are there in the system

Banking Money is tax payer’s money; This is so as in the event of Banks running in losses and losing their Capital, Government has been taking them over using Tax Payer’s money

Getting loans from banks on the basis of weak project reports is not tough- Mortgage Frauds by Borrowers from Bankers
Getting loans from banks on the basis of weak project reports is not tough- Mortgage Frauds by Borrowers from Bankers

There is nothing new to share that the King of Goodtimes, Mr Mallya has vanished after taking 9000 Cr from Banking System

My Queries are-

1. With One Mallya gone, are there any more Mallyas in making?
2. Is our banking system perfect now that no more Mallyas would be created?
3. If leakages in Banking System still happening, how long would it take to plus the leakages in banking system? How many more Mallyas do we need to teach us strengthen the system?
4. Why is Government inefficient to put a plug on such leakages?

These Borrowers are not Canny alone- but bold too- Not only that the defaulters are able to run away with money, they are bold enough to make fun of the system. In 2014, when the Debt Recovery tribunal Officers had gone to Mallya’s premises, they were hooted out by hooligans led by lawyers of Mallya. The Presiding Officer, Mr Subba Rao had to pronounce his order in din and hence to call police reinforcements

How Impotent is our Recovery System- Typically when a case is marked to Debt Recovery tribunal, The Tribunal is supposed to decide the case within 6 months and dispose appeals within 120 days. However, out of daily about 50 cases being listed at Mumbai DRT, only about 4 to 5 are disposed off in a day

The Debt Recovery Tribunal which was supposed to strengthen banking system is not having enough infrastructure to deliver the expected and the process of recovery of amount takes anywhere from 15 to 20 years.

In the 15 years wait to recover the amount through present system-the interest lost during such time far exceeds the principal sum and often the value of the security falls much shorter than the amount due- forcing banks to write off the same.

Long time taken helps create false evidences that impede the recovery process- During the long time taken to dispose off the cases, often the borrowers are able to create false evidences as back dated tenancies, wills, mortgages, charge in favor of HUF(Hindu Undivided family) to protect Minor’s interest

The lawyers defending such defaulters also add to mess; they usually act as touts of such defaulters and add to the corruption. Reason is not hard to guess. While fee as advocate at DRT is capped at Rs 40,000/- the earnings as tout can go anywhere upwards of Rs 20 lacs depending on the amount of default involved.
On the other hand, Bankers are not able to afford such expensive lawyers and thus the best talent in the system is hired by defaulters

How do such industrialists get loan in first place? To be fair to genuine business houses, it is not that every failed business is by a crook business house.

When a businessman wants to take a loan in not so deserving case, there is whole lot of the system in place to help him. Starting from Chartered accountants who charge anywhere from 2% to 7% depending on strength or to say weakness in the case and arrange the loan. Often part of this money gets shared.

Did you ask with whom? Nay……….you cannot be so naïve.

Over invoicing- One of the favorite method of getting fatter bank loans-

See how easy it to take loan from banks on inflated values

1. Typically a banker allows upto 75% of the project as finance
2. The Industrialist sets up a front company, quite often in Tax Havens as Dubai and buys machines or raw material in that company
3. The Indian front ending company buys from the Dubai company owned by same business man at inflated price
4. The Banker is pleased to finance such imports and pays his share of 75%, which practically means financing of upto 95% of the cost

Thus a web of group companies that can facilitate rotation of funds, and usually all this is in knowledge of statutory auditors, Chartered Accountants who happily sign the audit report. Ask them and pat the reply would come, under no laid down report, we are supposed to report this practice. Even otherwise, if they report, the business house will get its audit done from some other CA who would be more than willing to oblige?

Anyone here who believes that Bankers are not aware of this practice?

In such cases, when the promoter has hardly any investment at stake, what does he lose?

There are Sick Industries but never Sick Industrialists. Can State owned SBI or PTC who are one of the prime lenders to many Solar Power Plants claim that they have not financed such industries?

Story does not end here- In case of Mallya, banks kept on financing and refinancing it as they were convinced of its revival story. Once the unit is sick, you can get revival package from bankers. The Kingfisher Airline, grounded in 2012, had never made any profit in its eight years of operations. Still when Mallya approached the group of lenders for further lending in 2010, after initial differences among bankers, the bankers decided to take the big risk again and lend to Mallya again.

Judiciary too plays spoilsport in such cases; getting adjournments, stay is often a child’s play. Mallya could get cool three months after legal actions were initiated against him to flee the country

The Bankers who now are crying hoarse over the non recovery of Rs 9000 Crores from Mallya are unable to explain why at all the amount was financed to his company ignoring its own internal report.

Below is an illustrative picture Courtesy-economic times that explains the process of siphoning of funds from Banking Channels

Above Picture clearly explains the modus operandi to get loans from Banks on weak project reports
Picture Courtesy -Economic TImes- Above Picture clearly explains the modus operandi to get loans from Banks on weak project reports