......In the mid-1970s, deposit interest rates offered by banks were kept low by the RBI and most deposits flowed into public sector banks due to their ownership by Government. Some foreign banks were keen to get the deposits and started offering higher “interest rates” by a scheme called “portfolio management”: the money was reportedly invested in high yielding Government securities and the customer got higher interest. The scheme was a sheer fraud. No specific securities were identified and the customer was paid the full principal even if the value of Government securities fell at the time of repayment. The RBI also turned a blind eye to the repeated protests of PSU banks against the wrong practices of foreign banks.............
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