Punjab National Bank fraud: RBI Governor Urjit Patel calls for more powers over state-run banks

Governor Urjit Patel defended the central bank's role in the aftermath of the PNB fraud case and launched an indirect broadside against the government.

Published: 14th March 2018 06:55 PM  |   Last Updated: 14th March 2018 07:11 PM   |  A+A-

The Reserve Bank of India (RBI) Governor Urjit Patel attends a news conference after the bi-monthly monetary policy review in Mumbai | Reuters

By Reuters

MUMBAI: The Reserve Bank of India chief said on Wednesday that it had "very limited authority" over state-run banks and called for reforms in the wake of a USD 2 billion fraud to give the regulator the same powers to police state-run banks as it has over private lenders.

Reserve Bank of India (RBI) Governor Urjit Patel defended the central bank's role in the aftermath of the Punjab National Bank (PNB) fraud case and launched an indirect broadside against the government, which has been critical of the role of the regulator and auditors in failing to spot the huge alleged scam.

In a speech at a law university in the Western Indian state of Gujarat, Patel said there were numerous limitations in the RBI's powers over state-run lenders, such as its inability to remove directors, replace management, push through a merger or initiate liquidation.

While the RBI regulates all banks, state-run banks are also regulated by the government, which owns majority-stakes in them.

This has, in effect, led to a system of "dual regulation", said Patel, adding that this "fault line is bound to lead to tremors such as the most recent fraud".

The unravelling PNB fraud, the biggest in Indian banking history, has stunned the financial sector and pushed the RBI and government to crack down on bank systems and lending practices.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp