Cobrapost II shows black money is real India growth story
The second Cobrapost sting on money-laundering shows that handling black money is now par for the course in our big banks. There are no heroes in this story.
Unlike its first sting, the second Cobrapost undercover operation (styled Red Spider) that exposes the willingness of almost all banks and insurance companies to handle black money is less shocking.
The reason is ubiquity. When black money is everywhere, everyone is complicit. It shows that solutions do not lie in better policing and strong Lokpals alone, but in dealing with more fundamental systemic issues.
The Cobra's second sting tells us that India is run by black money. This is the real India growth story.
And when everyone is caught redhanded, there may be no red faces. When everyone is guilty, no one is unduly so. Except perhaps the regulators.
In the first sting, officials of HDFC Bank, ICICI Bank and Axis Bank - three of the bluest of blue chip private sector banks - were shown to be overtly helpful in aiding the Cobrapost undercover reporter with a hidden camera launder money. In the second sting videos released today, handling black money seems a part of normal banking operation even in public sector banks.
The difference seems to be this: public sector bank officials seem a little more circumspect about following the letter of the law on mundane issues like KYC (know your customer) and PAN cards, but they seem to know that these laws are observed in the breach. They seem a bit keener to avoid risks to themselves, but suggest ways to launder money that seem less risky - like using fake PAN cards, or breaking up money into several accounts, etc.
Take this interaction with a State Bank of India (SBI) official in Noida, part of the National Capital Region. When asked by the Cobrapost reporter whether he could invest black money and make it white, the officer does not flinch. When he asks about if this could be done with Rs 60-70 lakh, the officer is confident that such a small amount will be no problem. "Itna toh ho jayega (This much will be done)."
It is only when larger amounts of money are mentioned (Rs 5-7 crore) that the banker stops to think and says: "Hame kuch samay dijiye ... mein phone karta hoon (Give me some time ... I will phone you)." (Read the transcript of the sting tape on SBI here). In short, he does not reject the idea of handling so much black money, but needs time to figure out how to do it. Or, to give him the benefit of doubt, maybe he wants to pass the decision on to someone else.
The reason why the second Cobrapost sting is less of a shocker is the sheer pervasiveness of black money and our banks' degree of comfort in handling it. It appears to have become a part of the normal routine of banks in India.
If the first sting involving three private sector banks sent everyone reeling, it was because it showed bank officials as over eager to please people with bags of money, never mind its colour.
The fact that the sting confronted three of the best-run private banks was a big point of interest, since we all know that profit incentives are huge in these banks.
But today's sting, which bared a similar state of affairs in the big public sector banks as well as the smaller private sector ones, actually will come as a relief to the targets of the first sting.
This is because it shows that the handling and laundering of black money - or rather money which the taxman is unaware of - is part of the current banking system. It actually lets the Big Three of private banking breathe easier.
Today's sting deals with branch officials in SBI, Punjab National Bank, Bank of Baroda, Corporation Bank, Oriental Bank of Commerce, Canara Bank, Indian Overseas Bank, IDBI Bank, Allahabad Bank, Indian Bank and Dena Bank. Among private sector banks, we have Yes Bank, Dhanalaxmi Bank, Development Credit Bank and Federal Bank.
An eye-opener for the public is another revelation: that insurance schemes are often the most favoured vehicles for laundering money. Hence we find officials of Life Insurance Corporation, Reliance Life, Birla Sun Life and Tata AIG officials keen to help the CobraPost undercover reporter to launder nno-existent money.
So what are the real issues thrown up in this sting?
One, black money is now such a systemic issue, that it has become almost routine to handle it. It flows in and out of our banks with ease - we don't need Swiss banks to hide the money.
Two, safeguards such as KYC and PAN cards are pointless to deter the real crooks. Rooting out black money calls for more systemic change. Not more tightening of norms which will only upset ordinary folks trying to open bank accounts.
Three, while private bank officials, influenced more by the profit motive and the possibility of personal gains, seem positively helpful in helping people launder money, public sector officials do not seem to lack incentives to launder money either.
Four, the insurance companies seem to be major conduits for black money. We know that the industry is barely growing, given the clampdown on unit-linked insurance plans and agent mis-selling, but the pressure for business seems to be pushing them towards aiding illegalities.
Five, real estate seems to be the logical and main creator of black money - especially money owned by politicians. This much is obvious from the conversations recorded in the sting.
The conclusion that stares us is not the one that the Aam Aadmi Party thinks it is: black money is no longer about individual acts of corruption and its prevention does not lie only in tough policing. It is about the system itself.
We may be helped by having an impartial and incorruptible Lokpal, but the solution lies in closing the taps that help generate black money. And this could call for electoral reforms and public funding of elections, real estate reform with transparency, and the creation of a single regulator for investment products - which can at least ensure that black money that is blocked in one area does not end up in another product like insurance.
There are simply no easy answers to the problem.
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