Wednesday, Jun 29, 2022
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Fraud Vault

Big Fish Bonanza, Small Fry Blues

National banks go the extra mile to loan massive amounts to defaulters like Mallya and Modi but make life difficult for common people in need of money

Big Fish Bonanza, Small Fry Blues
Photograph by Alamy
Big Fish Bonanza, Small Fry Blues
outlookindia.com
2018-04-07T10:55:29+05:30

In the age of banking frauds, how easy is it for the common man or the small businessman to get a bank loan? While big businesses and corporates have it easy with banks, particularly public sector banks (PSBs), the small borrower is often made to run from pillar to post for a loan. Across the country, stories abound about how small businessmen and common people are harassed by PSBs by being made to go through a complex maze of procedures and regulations even as things are offered on a platter to big businesses.

Experts say that while in the past banks would give loans to big businesses against industrial or residential property as security, now the guarantees are much easier to obtain. The letter of undert­aking (LoU)—which is a bank guarantee that is issued by the bank for overseas import payments—is also easier to get. A bank, while issuing an LoU for a company, agrees to unconditionally repay the principal and interest on the company’s loan. The ease with which LoUs are ­obtained by companies today is evident from the Nirav Modi case where LoUs were issued indiscriminately by Modi’s  bank towards his businesses on which he has so far defaulted.

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