A perfect storm


What you see may not be what you get

With the country’s banks taking yet another pummelling following the recent unearthing of large scale frauds, it is evident that checks and balances built into the system do little to thwart the fraudsters. This is cause for concern.

The incidents of fraud also suggest that recent attempts to recapitalize public sector banks may not be enough to resurrect the fortunes of the banking sector. Tackling fundamental problems such as poor lending practices and questionable governance standards will require a major shakeup of the status quo. So, while overstretched borrowers should not expect to go scot-free, banks will need to be accountable for misallocation of funds, poor risk management and more. Just as important will be restoring independence and removing banks from the clutches of powerful interests. But is this realistic given the reality of India?

The promise of India is very real, but so are the risks – as Daiichi Sankyo discovered after its 2008 acquisition of an equity stake in Ranbaxy. What you see may not be what you get and it may be best to cultivate a sceptical mind.

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