Though the Reserve Bank of India is doing its best to bring the sector standards on par with international norms, banks are still failing by the wayside as they lose the trust of depositors and regulator. The last to join the list of rogue banks is United Western Bank.

Indian banks — especially some wayward ones — have been giving nightmares to depositors since financial liberalisation in the early 1990s. United Industrial Bank, Benares State Bank, Nedungadi Bank, Bank of Karad and several cooperative banks all had to down shutters and merge with stronger banks with aftershocks of varying intensity. Bank of Karad merged with Bank of India in 1994, Benaras State Bank with Bank of Baroda in 2003 and Nedungadi Bank with PNB in 2003.

“It’s time for the RBI to tighten norms so that directors and management of any bank should stop diversion of funds,” says Kirit Somaiya, President of Investors Grievances Forum. “UWB is a classic example of mismanagement and commissions on loan sanctions is an industry norm. The bank lent funds to its own directors which turned into non-performing assets.”

The rogues’ gallery

• BANK OF KARAD: A victim of the 1992 securities scam. The Bank of Karad (BOK) was placed under liquidation at the instance of the RBI by the High Court of Bombay in May 1992. The bank was used by stock brokers like Bhupen Dalal during the infamous Harshad Mehta-led scam in 1991-92. Scamsters persuaded Bank of Karad and the Metropolitan Cooperative Bank (MCB) to issue bank receipts as and when required. These BRs could then be used to do ready-forward deals with other banks. The cheques in favour of BOK were credited into the brokers’ accounts.

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