After the banking frauds that shook the country, RBI Governor Urjit Patel expressed that, “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.”
He added, “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.”
Patel asserted that the RBI has in place asset quality review of banks and said, “We are doing all we can to break this unholy nexus.”
He went on to express 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 of the modern day Indian economy and that until the churn is complete and the nectar of stability safely secured for the country's future, someone must consume the poison that emanates along the way.
He said, “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 also wished that promoters and banks, individually or collectively would reconsider being on the side of ‘Devas rather than Asuras in this Amrit Manthan.’
Referring to PNB, Patel said the RBI had identified, based on cyber risk considerations, the exact source of operational hazard through which according to him, enabled them to understand how the fraud had been perpetrated. He said that the RBI had in particular, issued precise instructions via three circulars in 2016 to enable banks to eliminate the hazard.
He explained, “It turns out ex post the bank had simply not done so. Clearly, the internal processes at the bank failed in allowing the operational hazard to remain in place in spite of clear instructions to close it.”
He stated that 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.
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.” he said.
