We at Reserve Bank also feel anger, hurt and pain at banking sector frauds and irregularities, he said
In the wake of recent mega PNB fraud, Reserve Bank of India governor Urjit Patel said RBI’s very limited authority under the banking acts, as well as the custom to hold the PSB boards accountable has become problematic. “We at Reserve Bank also feel anger, hurt and pain at banking sector frauds and irregularities. Banking frauds amount to looting of our country’s future by some in the business community in cahoots with some lenders.
If we need to face brickbats and be ‘the Neelakantha’ consuming this poison, we will do so as our duty,” said Patel on the banking frauds. He added that the market discipline mechanism for public sector banks is appreciably weaker compared to that at private banks. He said that it is ‘infeasible’ for banking regulator to be in every nook and corner of banking activity to rule out frauds by being there. “Legal reforms are highly desirable to empower RBI to fully exercise same responsibilities that apply for public sector banks to private banks as well. Legal reforms are also desirable to empower RBI to ensure a level playing field in supervisory enforcement,” Patel added. He said RBI needs to refocus on the bigger issue of stressed assets resolution. The RBI chief suggested internal processes at PNB failed by allowing operational hazard to remain in place in spite of clear instructions to close it. Patel opined that criminal investigation of frauds and attached penalties can serve as an effective deterrence. “IBC with RBI’s revised framework will help break promoter-bank nexus, which has led to crony capitalism and the attendant NPA/credit misallocation,” he said.
First Published: Wed, March 14 2018. 18:05 IST