All About Rs 7,926 crore Transstroy Fraud

We’ll talk about Transstroy but first, let’s talk about a typical Indian scenario with respect to the spoilt brats. Whenever an exceedingly over speeding car is stopped by the traffic police in Delhi there’s one phrase that you would hear most of the times – “Tu Jaanta Hai, Mera Baap Kaun Hai?” (do you even know who my dad is?)

Now, let’s get into the depth of this. This phrase represents the confidence that the defaulter carries in the sense that he is pretty sure of escaping after committing the mistake. The defaulter is confident because he knows that his dad is an influential person and therefore, the police would not be able to take any action against him.

Just in case you are thinking that probably we’re going out of context, well, actually we’re not. The news is that Transstroy, a Hyderabad based firm has committed a fraud to the tune of 8000 crores. For your information, the company is involved in construction of bridges, highways, irrigation projects etc. The important thing for you to know is that once again a PSU bank is involved (actually it’s a consortium of banks led by Canara Bank). Read on to find out more.

What’s the Fraud Here?

If you request for a loan from the bank, you need to mention a purpose. That purpose can not be taken for granted and you can not use the loan amount for other purposes based on your will. But that is exactly what Transstroy did! As per the media reports, Transstroy took loans worth thousands of crores and then the funds were diverted for personal use.

The Central Bureau of Investigation (CBI) conducted raids a few days ago after which the fraud was reported. As per the statement issued by the CBI spokesperson, the company is also involved in fabrication of accounts books, round-tripping of funds, fudging of stock statements etc. The loan of 7926.01 crores that was sanctioned to Transstroy eventually turned into an NPA. And, that is when the entire fraud came to fore.

Why Just Public Sector Banks?

A trend to notice is that most of the times whenever there’s a scam or fraud, a public sector bank suffers because it had issued loans to the defaulter. We are not saying that it does not happen with the private sector banks. But, most of the times it’s a public sector bank. Now the question is, why?

It is hard to believe that the public sector banks are so gullible that to get a loan, any company would make them believe whatever they wish to make them believe. There’s a system in place and it involves due diligence. Then, how come such fraudulent companies are able to get their loans sanctioned? 🤔

It’s a big question because whenever a common man approaches these banks for a loan, he doesn’t get it that easily. In fact, a common household in India believes that you need to shower your sweat and blood in order to get a loan from these banks.

The Underlying Cause

It’s always better to get to the root cause of the issue. People may see this just as another fraud and may think that ‘Records are meant to be broken’, so there’s nothing new in this fraud. Just that, the value of the fraud has crossed the benchmark set by Nirav Modi (as this one is worth more than his). But, think about the PSUs, NPAs and the common taxpayer’s money linked with it.

A common man pays tax in order to receive services from the government and to witness the development of the nation. Now, when the frauds happen, the government is bound to rescue the ailing PSUs or banks, and this money gets used. Also, this directly affects the fiscal deficit.

All in all, the money that should have been utilized for a developmental purpose goes in vain. In fact, it can be looked upon in a way that the scamster or fraudster is in an advantageous position, whereas the honest taxpayer suffers.

Coming back to the underlying cause, it appears as if the PSU banks issue loans to the potential defaulters because they know that the government will rescue them come what may.

The Bottom Line

One of the most important concluding remark is are the bank officers to be blamed for the fraud(s)? Or there’s something else? Behind every scandalous loan in recent times, a political connection was reported. In this case as well, an ex-MLA has been booked.

So, is the system at fault? If yes, then there should be some measures to resolve this because the government just can not let taxpayers’ money waste like this. It’s not that nothing is being done in this direction but probably that’s not enough. Is there a way by which such frauds can be avoided in future? We can just hope for such a way to be devised soon.