Director, Central Bureau of Investigation (CBI) has, for the first time, come out with sensational revelation about corporate frauds in recent years. According to him, the involvement and fraud are to the tune of Rs. 29,000 crore. He believes that this huge fraud could happen because of collective failure of regulatory oversight mechanism. In simpler words, he wants to say that the system that was supposed to supervise the corporate financial transactions was either incompetent to perform its normal duty or that it had developed a nexus with the fraudsters. In all probability, a nexus had been formed and the auditors and supervisors were part of fraudulent activity.
In majority of fraudulent cases huge funds have been siphoned off by promoters and top management. The situation prevails in private as well as public sector corporate alike. The startling revelation made by the CBI chief is that commercial banks have reported 1.69 lakh cases of frauds involving an amount of Rs 29,910 crore as on March 31, 2013.The public sector banks have commutatively lost a massive sum of Rs 22,743 crore due to cheating and forgery in the three years ending March 2013.
This is a very grim scenario that is bound to strike at the root of our financial stability and economy. It indicates that the regulatory system meaning a mechanism that controls fraud and forgeries etc. is either very old fashioned and not commensurate with the needs of the day or that it has become inseparable from the rot that prevails in the system at the moment. The situation has specifically worsened during past three years and the huge frauds have happened without being detected and investigated into.
The fact is that corruption, bribery and frauds have become endemic in our society. This is surprising because we believed that moral and ethical values are so strong and entrenched in our society that vices like corruption would not seep down to all layers of society. But, this is not the case and there is absolutely no logic in believing that we have still retained the moral standards. There was a time when we boasted that the Indian Corporate was doing fairly well and was setting forth an example for public undertakings to take cue from them about how business is to be carried along established principles.
The question is how to stem the rot? This has opened virtual Pandora’s Box and so many questions and issues are surfacing along with this revelation. How is Government going to control the frauds in corporate sector and its impact on public sector is one of the serious questions which will have to be answered. Primarily, as we know the last one decade or more has been a decade of scams, corruption and bribes. It was for nothing that the anti-corruption campaign championed by Anna Hazare received such massive response from the Indian public. It was clear from that event that the people of this country were no more prepared to tolerate the canker of corruption that was eating into its vitals. Sadly, the then Government failed to fathom the situation in its right perspective and did not rise to the occasion to meet the challenge on national level. Now, we are face to face with a very delicate situation in which some quick remedial measures have to be taken.
New Government at the centre will be formed in a day or two. It has a long agenda of prioritized business to handle and it will take its own time to begin the cleaning campaign. Fundamentally, what is needed is deep and effective reformation in the social system together with drastic measures for effective accountability. We have laws and rules and procedures but we are loath to implement them when there is dire need to do so. It is now important to understand the compulsion of calling the concerned to accountability. We do not mean to say that accountability should be ruthless and arbitrary. We emphasize that the laws and rules pertaining to holding persons responsible should be implemented in right earnest. That is the first step of reforming the system and dealing with frauds. The rest will follow.
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