By Ruma Dubey

Sometimes, the most difficult questions are the ones which are the simplest. Like this innocent question by a fresher out of college, wanting to make it big in the stock market. She asked, "how come only public sector banks are corrupt? Are the private sector banks always honest?"

Indeed, that's a question to ponder upon. We all have been so caught up in this entire gambit of things unfolding and its effect on the markets that we lost sight of the bigger picture here. This innocent question speaks volumes about the character of the public sector banks today. What makes the public sector so vulnerable to bribes and corruption?  And how come, the private sector bank has kept its integrity intact. Infact, this entire scam has gone down very well for the private sector banks. One's loss is another's gain.

The public sector, just like the private sector banks have the same set of rules and regulations stipulated by RBI before sanctioning a loan. How come, despite so many checks at every stage, the public sector banks failed miserably? The most vexing question is why have the senior employees of PSU Banks taken bribes when their pays are adequate? And how come, the employees of private sector banks do not get waylaid by temptation? This means that just as the work culture of both the sectors are poles apart, the quality of people is also radically different.  The people who work at both the banks are citizens of India and many would be friends, relatives. Yet, this huge difference in character comes as a complete eye opener. Let's not place the private sector banks completely above board; probably there is corruption there too and maybe they are just smarter or maybe just lucky to not have got caught.  Irrespective of the reasons, this scam has widened the chasm between both the banking sectors.

Another question which comes to mind is – why did these realty companies go to public sector banks and not the private sector banks when they could have avoided the cost of the bribes? Well, if it were me and you, common people, we could choose the PSU bank mainly for the marginally lower interest rates. But for companies like DB Realty and JP Associates, given their brand equity and reputation in the markets, any private sector bank would have given loans too. Surely for these companies, the marginal interest rates would not have been the criteria. Clearly, the companies knew that getting loans from the private sector banks would be tough, maybe it's papers were not in order or there were objectionable transactions or they were already overdrawn to the hilt. And in such a scenario, they knew that they could get their oars in the water only through public sector banks. This vulnerability of the public sector banks is a much bigger issue. Curing the symptom will not work, we need to get to the cause of the disease and root it out, or else, such ailments will keep cropping up.

In this entire conundrum of uncertainty and scam, one thing we currently know with certainty is – avoid pure realty stocks. Things are only going to get tougher for the sector and securing loans for them will become a nightmare.  There are more regulations where there is more corruption. So the kind of checklists which the sector will have to go through will be Herculean. There is fear that same sets of laws could seriously impair the infra companies too, which is reflected in the battered down prices of the sector today on the bourses.

Yes, there will be more checks and more regulations but such preventive measures are temporary. Someone or the other always works out a way through. Corruption has its own motivations, and one has to thoroughly study that phenomenon and eliminate the foundations that allow corruption to exist. With the onus now on PSU banks, we need to ponder on why the PSU bank employees are more vulnerable to corruption than the private sector banks.