Urjit Patel Expresses Anguish Over Frauds in Banking System, Says RBI Has Very Limited Authority Over State-Run Banks

Mumbai, March 14: In wake of the recent Nirav Modi-led PNB scam, Reserve Bank of India (RBI) governor Urjit Patel on Wednesday said that it had very limited authority over state-run banks. Expressing anguish over a spate of banking frauds, Urjit Patel said like the Neelakantha, the central bank will consume poison and face brickbats, but will persist with an endeavour to become better with each trial.

The RBI Governor called for reforms in the wake of a $2 billion Punjab National Bank (PNB) fraud to give the regulator the same powers to police state-run banks as it has over private lenders. As per reports, Patel defended RBI’s role in the aftermath of the mega PNB fraud and said that RBI has in place asset quality review of banks and "we are doing all we can to break this unholy nexus".

Urjit Patel Breaks Silence on PNB Scam:

Breaking silence over the Rs 12,967 crore scam at PNB, he said, "I have chosen to speak today to convey that we at the Reserve Bank of India also feel the anger, hurt and pain at the banking sector frauds and irregularities." Referring to scam-hit PNB, Patel said the RBI had identified, based on cyber risk considerations, the exact source of the operational hazard through which "we understand" now the fraud had been perpetrated.

Patel said the RBI will undertake actions against the bank that it is empowered to but this set is limited under its Banking Regulation Act powers over PSBs.  Noting that "success has many fathers; failures none", the Governor said there has been the usual blame game, passing the buck, and a tonne of honking, mostly short-term and knee-jerk reactions. "These appear to have prevented the participants in this cacophony from deep reflection and soul-searching that can help solve fundamental issues that are the root cause of such frauds and related irregularities in the banking sector," he said.

Like Neelakantha, the central bank will consume poison and face brickbats, says Patel

The Governor said that the RBI has undertaken the cleaning up of the country’s credit culture as the Mandara mount or the churning rod in the Amrit Manthan or the Samudra Manthan of the modern day Indian economy.

He said, “Until the churn is complete and the nectar of stability safely secured for the countrys future, someone must consume the poison that emanates along the way”  "If we need to face the brickbats and be the Neelakantha consuming this poison, we will do so as our duty; we will persist with our endeavours and get better with each trial and tribulation along the way," the Governor added.

RBI Governor on rising bad loans (NPA):

Patel also flagged the issue of rising bad loans (NPA) saying that the problems needs immediate attention. "Its magnitude is larger than Rs 8.5 lakh crores of stressed assets on bank balance sheets and its significance stems from several practices in promoter-bank credit relationship that need immediate attention".

While delivering a lecture at the Gujarat National Law University on Wednesday, the RBI Governor said, "In plain simple English, these practices amount to a looting of our country’s future by some in the business community, in cahoots with some lenders." As per reports by PTI, Patel made a pitch for "making banking regulatory powers neutral to bank ownership and levelling the playing field between the public sector and private sector banks".

(The above story first appeared on LatestLY on Mar 14, 2018 09:23 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).