Page 36 - English Tehelka Issue 6 - March 31, 2018

column banking

Nirav Modi scam: Bank misuse of the system? Why

do the same set of business-
officers hold RBI responsible men get contracts abroad?
Why are these business-
men showcased abroad and
why are they selected by
the Prime Minister’s Officer
News & Pointing out failures of the RBI and the Centre, the banking sector (PMO) and Finance Ministry
has expressed that PSBs play a key role in the Indian economy that
views needs a strong system to expand on the growth trajectory instead of industry associa-
tions, which was the practise
Bharat hiteshi earlier?”
Accordion to AIBOC,
s the country reels under ment, which is now a bigger and more only 11,643 borrowers in the
Hiteshi is an the shock of multiple dangerous issue given the impunity with country have availed 38 per
independent journalist- bank frauds and thepo- which bank officials have participated cent of the total loans given
turned-author and a tential impact of lakhs in fraud. However, the Bank Officers by banking sector as on
political commentator. of crores of bad loans in Confederation has a different take and March 2016. Just 12 NPA ac-
The views expressed A the banking system, the makes some important points about counts have an outstanding
are his own All India Bank Officers’ Confederation the accountability of regulators and the of 2.50 lakh crore and 84
(AIBOC) has asked the government to government. per cent of the NPAs belong
stop the blame game in bank frauds and DT Franco, General Secretary of to corporates. Every year
instead make the Reserve Bank of India AIBOC, said, “Much is talked and written banks writeoff thousands of
(RBI) take responsibility for introduc- about scams in the banking sector after crores for there corporates,
ing new systems and for failure in bank the Nirav Modi scam in Punjab National which is the biggest scam.
supervision. Bank (PNB). Why do the RBI, Finance The Federation of Indian
Regulatory agencies, including the Ministry, Central Vigilance Commission Chambers of Commerce
central bank, need to become more vigi- (CVC) and others wake up only when a and Industry (FICCI) and the
lant and the role of auditors needs to be major scam surfaces? Why are we not • Job half done Nirav Modi episode points are banks forced into other activities Associations of Chambers
probed further. Banks are already being analyzing the failure of the system? out that those who were to monitor like Aadhaar linkage, Aadhaar enrol- of Commerce of India (Assocham)
audited multiple times and, hence, there What is the role of the Government transactions failed at their job ment, selling pension scheme of the should ask their members to be
is need for a regulatory agency to make and its policies which cause system Government and cross-selling. These honest and repay the loans instead of
sure that auditors are playing their due failures and scams?” There have been are major reasons for weakening su- demanding privatisation.”
role. As the Nirav Modi-Punjab National infamous scams such as those pertain- to increase them credits that would pervision. Why is the RBI still hesitant Blaming the RBI for not publishing
Bank (PNB) scam unfolds, it is clear that ing to Harshad Mehta, Ketan Parekh and give better taxes for the country? It to publish list of defaulters and thus list of NPA borrowers and introduc-
those who were to monitor transactions the non-performing asset (NPA) scam, is a well-known fact that the SWIFT allowing them to run away from the ing new mechanism to help corpo-
failed at their job. which have not yet been declared as has been used for frauds from the country. Why does the Prime Min- rates, the bank officers’ union says,
It must be recalled that one of the fall- ‘scams’ by the Government or the RBI nineties and there are many reported ister take with him on foreign tours “The RBI is the one which introduced
outs of the scandal surrounding the US due to misuse of the loopholes in the hacks of SWIFT. Why did the RBI and businessmen who are known for Corporate Debt Restructuring (CDR),
energy company Enron was the closure system. „In India, the political economy the Government not intervene to Strategic Debt Restructuring (SDR),
of reputed accounting firm Arthur An- circumscribes the quality of regulation correct the system? What happened Sustainable Structuring of Stressed
dersen. In our country too, stern action and internal control policies at banks. to supervision and audit? Why did Assets or S4A, asset quality review
must be taken against auditing agencies. It is important to appreciate this while the RBI failed in supervision? Is it The key issue (AQR) and Prompt Corrective Action
At the same time, greater autonomy fixing responsibility for the bad loans because the RBI has been busy with (PCA). None of them have helped
needs to be given to state-run banks. The and large frauds at public sector banks other things like demonetisation? of bank chief the banks but they have helped the
issue of appointments of bank chiefs, (PSBs),“ observed the AIBOC . They are still counting the notes even appointments, corporates to loot. With the revised
for instance, is a key issue meant to be About the misuse of letters of under- after a year! Has RBI lost its auton- norms the banks will have to declare
handled by the relatively new Banks taking (LoU) in the recent Nirav Modi omy?” The bank officers also raised that falls within 2 lakh crore more as NPAs and
Board Bureau. Instead, it seems to re- fraud case, Franco said, „In this case, several questions on transfer and the purview of the provide 50 per cent provision for
main within the purview of the Finance when a buyer’s credit is available for appointment of another person as them. This is going to make all the
Ministry. All these issues will now have importers, then why did the RBI intro- Managing Director at PNB, while it is Finance Ministry, banks in the country to become red.
to be reviewed and overhauled in light of duce LoUs, which is not in vogue among the job of the Banking Board’s Bureau This will lead to a financial crisis like
the worsening news from banks. foreign banks? What was the necessity headed by Vinod Rai to make such is meant to be the US crisis of 2008. The Govern-
The Bank Officers Confederation had for RBI to encourage imports by help- appointments. handled by the ment may announce a financial
earlier objected to banks being burdened ing the borrower to get cheaper credit Explaining reasons for weak su- emergency and handover banks to
with the responsibility of Aadhaar enrol- abroad instead of helping Indian Banks pervision in banks, AIBOC said, “Why Banks Board Bureau the corporates. This will be a danger

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