PNB fraud case: AIB Officers Confederation questions RBI's negligence
Lucknow: The much hyped Punjab National Bank fraud case has taken every one in the nation by storm. Much has been written about jeweller Nirav Modi as the CBI has started digging in and much has been revealed about the Gitanjali group. There is much anger in the banker’s association as well since it has been suggested that the state owned banks should be privatised.
All India Bank Officers’ Confederation has also expressed its disappointment over the negligence by the finance ministry of nation and the Reserve Bank of India (RBI) that leads to such big scams. The AIB confederation has asked the Finance Ministry and the central bank to stop hiding their faces and take up the responsibility of the loopholes and failures of the system.
Here is the entire statement released by the AIB Officers’ Confederation:
“Much is talked and written about scams in the Banking sector after the Nirav Modi Scam in PNB. Why RBI, Finance Ministry, CVC and others wake up only when a major scam surfaces? Why we are not analysing the failure of the system? What is the role of the Govt and its policies which cause system failures and scams?
There have been Harshad Mehta Scam, Ketan Parekh Scam, and the NPA scam (not declared as scam by the Govt or RBI) due to misuse of the loopholes in the system. In this case, when a Buyer’s Credit is available for importers why at all RBI introduce Letter of Undertaking which is not in vogue among foreign banks? What was the necessity for RBI to encourage imports by helping the borrower to get cheaper credit abroad instead of helping Indian Banks to increase them credits which would give better taxes for the country?”
AIB questions RBI losing its autonomy:
The AIB also has stated, “It is a well-known fact that the SWIFT has been used for frauds from the nineties and there are many reported hacks of SWIFT. Why RBI and the Govt did not intervene to correct the system? What happened to Supervision and Audit? Why RBI failed in supervision? Is it because RBI has been busy with other things like demonetisation? They are still counting the notes ever after a year! Has RBI lost its autonomy?”
Banking officers worried about privatisation of PSBs:
“In what way the Chief Economic Advisor has improved the economy? He is talking about Privatisation? Does he want to handover the Banks which have been looted by the Corporates to them so that they can loot more?
We need better banking, better reporting, better supervision and better technology in aid of these. What we need is to ignore the cry to privatise PSBs, as if ownership uniquely determines ethics and efficiency. The popular chestnut is that PSB are structurally vulnerable to poor governance, resulting in the run-up in NPAs. Data, yet again, militate against the hypothesis.
While there might be cases of fraudulent behaviour, they are not the overwhelming cause for the accretion of NPAs in PSB. Second, cases of governance breakdowns are not a monopoly of PSB — globally and in India, many privately-owned banks have been regularly identified with such errors of omission and commissions. Global regulatory fines on banks run into many billions of dollars every year.
The Economic Survey 2016-17 studied the causes of the large NPA build-up in PSB. A very large part of it can be attributed to a growth- induced credit bubble, followed by macroeconomic and regulatory issues that burst the bubble rudely. Corruption and malfeasance were not identified as a key variable.”
Suggestions given by the AIB Officers’ Confederation to lessen such frauds:
Three important steps are needed immediately to save the banking sector and the economy.
One: Publish the names of defaulters of the Banks and ask banks to write to the home Ministry to make entry in the passports of the Board of Directors of these Companies “Emigration Clearance Required” so that they don’t run away like Vijay Mallaya, Jatin Mehta, Nirav Modi and Mehul Choksi.
Two: Have a relook at the NPA norms. Why all accounts which have a default of 30 days be declared as NPA? Why not look at the reasons, scope for recovery, security etc?
Three: Appoint Officer Directors, Employee Directors and Nominee Directors immediately and allow them to play a watchdog role. Remove RBI Executives and Finance Ministry Officials from the Boards of Banks as they are Supervisors and they can’t supervise themselves. It’s time for a wakeup call.