New Delhi, Mar 14: Reserve Bank of India (RBI) Governor, Urjit Patel, said on Wednesday that the central bank is ready drink all poison but will persist with endeavour to become better with each trial. He has spoken for first time after PNB fraud scam.
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.
Addressing gathering at National Law University, Patel said that 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 said RBI has in place asset quality review of banks and “we are doing all we can to break this unholy nexus”.
In a strongly-worded speech, he said that there were numerous limitations in the RBI’s powers over state-run lenders, such as its inability to remove directors, replace management, force a merger or initiate liquidation.
He further said that RBI has undertaken the cleaning up of the country’s credit culture as the Mandara mount or the churning rod in the Amrit Manthan or the Samudra Manthan of the modern day Indian economy.
Referring to PNB fraud scam, Patel said the RBI had identified, based on cyber risk considerations, the exact source of operational hazard through which “we understand” now the fraud had been perpetrated.
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.
This should restore some market discipline against such practices, especially in the case of private sector banks, Patel said.
(With inputs from PTI)