The 11300 Crore-Rupee Question: Who Pays for These Financial Frauds?


The 11300 Crore-Rupee Question: Who Pays for These Financial Frauds?

Illustration: Shruti Yatam


veryone has the footage from the 26/11 terror attacks in Mumbai imprinted on their mind – Ajmal Kasab strutting around CST station with an automatic weapon, bodies strewn all around. One of the most iconic buildings in Mumbai, the Taj Mahal Hotel, up in flames. Quite similarly, terrifying were the visuals of the earthquake that struck Bhuj in 2001 and the floods that ravaged Uttarakhand in 2013. Physical property in absolute shreds, distress and pain on people’s faces, their livelihood shattered.

After every such instance of mass mayhem, there are committees set up to look into the matter, questions raised over disaster management. We have Arnab Goswami shouting at the top of his voice for two weeks; international and diplomatic pressure is mounted if it’s a conflict that extends beyond our borders. After all, we can relate to what it is like to be in such a situation.


Injury, destruction, violence, trauma, blood, misery, pain, and death are emotions we all relate to at a very personal and humane level. You can see the calamity, and because you can see it, you can feel the pain. One can objectively determine the number of people who suffer, the extent of the suffering, and how their lives change overnight.

A financial crime is very different. It’s almost a victimless crime. You don’t see the damage, you don’t feel the pain even though it is an event that could potentially destabilise the economic system and the global market. After all, only a few numbers have been wiped off from some computer or a database somewhere in Dubai, haven’t they? “How bad can it be? It has not affected my life in any way. I’m sure we can trace the money trail, catch the crooks, put them behind bars, and it solves the problem.” That’s how punishment works, we learnt it in school. Well, not quite.

Who then pays for financial frauds?

On the exterior, it seems that a few individuals managed to scam their companies or banks of huge volumes of money. Surely, it must be the banks and companies who are losing the money? Unfortunately, or perhaps fortunately, we now live in a world that is truly connected (in the way that Nokia dreamed of) and nothing has effects in isolation. When a company goes down, people who invested their money in that company go down with it. But, wait for it, sadly, there’s more.

Where does government get the money from? Yes, the tax money that you and I pay.

When banks keep on accumulating bad loans, eventually governments have to kick in and bail them out. Why can’t banks just fail and fall down? We seem to be doing it with farmers all the time. It’s because everyone has money deposited in banks – the rich, the middle class, the poor; the young and the old. Many deposit their life’s savings in those tiny bank lockers. And for them, such a loss would be humongous. And so, banks are treated with kid gloves, a lot like millennials in school: They are not allowed to fail. Often governments show up at the last minute like Bruce Wayne with arrogant confidence and a huge suitcase stuffed with cash.

Where does government get the money from? Yes, the tax money that you and I pay. The ₹29 GST that you paid on the latte at Starbucks so that the government could use it to build a metro station, is actually used by it to bail out a bank because some asshole at Morgan Stanley scammed the system and is now partying in the Caribbean Islands in his million-dollar home. You paid the government, the government paid the bank, he took the money from the bank. So in essence, you paid your hard-earned money for his party. Not only does your money facilitate someone’s greed, it gets diverted from the function it is supposed to serve – development.

I hate to say it, but there’s more. Economic disasters have knock-on effects that can last years, and sometimes decades. The 2008 financial crisis cost the US taxpayer $700 billion (take two minutes to process that number and count the digits), and while the crisis originated in and was funded by America, the entire world paid for it, and in more than just monetary terms. Barack Obama’s hair turned grey, trying to overturn the situation he inherited.

When banks become weaker, their lending is affected. When banks don’t lend enough money to businesses, growth of corporations deteriorates; they can’t build new factories and take up expansive projects. When corporations aren’t growing, they start firing people. When people don’t have jobs, you see a spike in the unemployment rate. When the unemployment rate rises, one sees an increase in crime and other social problems. When crime increases, people pay with life.

Add a layer of globalisation to it, and you see how catastrophic the situation becomes. If a bank isn’t lending to Reliance in India, it would affect how much money will flow into their foreign operations in Africa. When people start making less money and get fired in factories in Africa, it affects the employment rate and financial stability of those countries. Scale up the situation to every company and every country in the world, and you realise the magnanimity of it all.

One may not be able to exactly pinpoint the number deaths or the period of tragedy, but there’s very little debate on the fact that it affects everyone, and has disastrous consequences when things go out of hand. To add insult to injury, the law works quite differently for powerful people than it does with the rest of us. Men in the middle of these financial storms (yes, they’re invariably all men) mostly tend to walk away untouched, because they have huge political clout and influence. We’ve seen that in India time and again, over decades. When poor farmers default on loans, it’s a crime. When rich millionaires do it, it’s called “negotiating the terms of payment”.

It has far often been the case that regulators and auditors, who are meant to stop the party, were also in on the frauds, dancing to the music, so they could make a few million as well. All of it at the cost of your and my tax money. While physical harm and impact of violence is instant, the effects of financial fraud are long term. To quote Miranda Tate from The Dark Knight Rises, “You see, it’s the slow knife, the knife that takes it’s time, the knife that waits years without forgetting, then slips quietly between the bones, that’s the knife that cuts deepest.”