I have politicians in my family in India and this is actually an end-game for the politicians. This was damn too common with "urban banks" which are like credit unions. Last Indian president Mrs. Pratibha Patil was charged with such frauds during her political career.
This is how it worked with "urban banks". A politician sets up a bank and gets it running smoothly. Such banks can operate only on small deposits and limited to local area only. They are subject to different banking rules and can give much higher returns and aggressive loans. The banks typically do well.
As the elections nearby the politician and his friends will borrow huge loans. New projects will be setup with these loans. After an year or so the project declares bankruptcy and the loan becomes and NPA. Politician's friend buys the stalled project at throw away costs and then if needed sells back to the politician. Wealth is thus transferred from poor folks to rich politicians.
This time however it has happened with major banks.
The MD of India's top private bank makes around $5M-$10M a year. The Public sector bank MD however makes around $50K max a year. that is 10x less salary. The banks themselves are a giant jobs program.
This is how it worked with "urban banks". A politician sets up a bank and gets it running smoothly. Such banks can operate only on small deposits and limited to local area only. They are subject to different banking rules and can give much higher returns and aggressive loans. The banks typically do well.
As the elections nearby the politician and his friends will borrow huge loans. New projects will be setup with these loans. After an year or so the project declares bankruptcy and the loan becomes and NPA. Politician's friend buys the stalled project at throw away costs and then if needed sells back to the politician. Wealth is thus transferred from poor folks to rich politicians.
This time however it has happened with major banks.
The MD of India's top private bank makes around $5M-$10M a year. The Public sector bank MD however makes around $50K max a year. that is 10x less salary. The banks themselves are a giant jobs program.