Why you should worry about bank scams and bad loans

Punjab National Bank (PNB) , which has been in the news for the Rs 11,300 crore fraud isn’t the first bank to be scammed. Till December 21, 2017, over 25,600 banking fraud cases worth Rs 1.79 billion have been reported. And it is not just scams that banks are losing out their capital to, bad loans is another pain area. Between September 2013 and September 2017, the bad loans in the industry quadrupled from Rs 28,417 crore to over Rs 1.1 lakh crore.

So, should this bother you? Yes, the losses inflicted on the banks due to scams and bad loans have a direct bearing on you. Here’s how:
One, the taxes paid by you will now be diverted towards recapitalisation of banks, instead of welfare activities.
Last year government announced recapitalisation of state-run banks to the tune of Rs 2.11 lakh crore, this after it had already infused Rs 1.18 lakh crore since 2008 into banks. The massive amount can keep the various welfare schemes of the government running for years...

Two, it leaves you poorer as an investor.
Since PNB scheme came to light, it shares have fallen 60% since February 14, 2018. In fact, other PSU banks too have been bruised, shaking confidence and trust of the investors...

Three, it means less borrowing money for you.
According to news reports, PNB that's been hit by the scam has lost 10 times its 9-months net income of Rs 1,134 crore due to the recent scam . Banks with inadequate capital will be wary of fresh lending. This, in turn, impacts new borrowers making it harder for them to get loans.