No banking regulator can catch, prevent all frauds: Urjit Patel

Postado Março 15, 2018

His comments come nearly a month after India's second largest lender, state-owned Punjab National Bank was allegedly defrauded of around Rs 13,000 crore by billionaire jeweller Nirav Modi and his uncle Mehul Choksi in connivance with some bank employees. 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".

Without naming the Punjab National Bank, Patel said, "We at Reserve Bank also feel anger, hurt and pain at banking sector frauds and irregularities", he said, according to The Indian Express.

RBI Governor Urjit Patel today sought more powers to deal with frauds at public sector banks (PSBs) saying that the current enforcement mechanism is "not perceived" to be a major deterrent for fraudsters relative to gains from such activities.

The RBI regulates all commercial banks under the Banking Regulation (BR) Act, 1949, but additionally, all PSBs are regulated by the government of India under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Bank Nationalisation Act, 1980, and the State Bank of India Act, 1955.

Delivering a lecture at the Gujarat National Law University here, he 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". "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", he said.

"Reserve Bank of India (RBI) has apprised that it had issued two circulars to banks in the months of August and November 2016, related to security and operational controls in the SWIFT environment", Minister of State for Finance Shiv Pratap Shukla told the Rajya Sabha in a written reply. "If a regulator could achieve such ideal outcomes, it would effectively imply that the regulator can do anything that banks can do, and by implication, can simply perform the entire banking intermediation activity itself". "Hence, there has been the usual blame game, passing the buck, and a tonne of honking".

The central bank chief suggested that internal processes at PNB failed by allowing operational hazard to remain in place in spite of clear instructions to close it. On the issue of of rising bad loans (NPA), he said that the problems needs immediate attention.

He urged the government to make banking regulatory powers neutral to bank ownership and levelling the playing field between public sector and private sector banks.

"Its magnitude is larger than the ₹8.5-lakh crore of stressed assets on bank balance sheets and its significance stems from several practices in the promoter-bank credit relationship that need immediate attention". The RBI has been clamping down on the failure to recognise asset quality as non-performing as per its norms by requiring that banks, whose "divergence" exceeds by 15 per cent of the true non performing assets (NPAs) as per the norms, disclose the divergence.