Govt will chase down cheats in the banking system: Jaitley
JAITLEY WAS SPEAKING AT THE 41ST ANNUAL MEETING OF ASSOCIATION OF DEVELOPMENT FINANCIAL INSTITUTIONS IN ASIA AND THE PACIFIC
Finance minister Arun Jaitley broke his silence on Tuesday, delivering a stinging rebuke to the auditors and the management of Punjab National Bank (PNB) for their failure to detect the ~11,400-crore fraud.
Further, in a veiled reference to the Reserve Bank of India (RBI), Jaitley added, “Supervisory agencies need to assess as to what new system has to be put in place to detect irregularities... (they) should ensure the stray cases are nipped in the bud and they are never repeated.”
Jaitley was speaking at the 41st Annual Meeting of Association of Development Financial Institutions In Asia and the Pacific.
Coincidentally, around the same time, the central bank announced the setting up of a panel under the chairmanship of YH Malegam, a former member of the central board of directors of RBI, to study rising cases of frauds in banks and set out a blueprint to curb them. RBI, a subject of recent criticism in some quarters, also defended itself claiming that it had warned banks of possible misuse of SWIFT system.
Earlier Jaitley reiterated the government’s commitment to pursue unethical businessmen who have cheated the banks till its last ‘legitimate capacity’ and till the ‘last possible conclusion’.
This is the first official reaction of the finance minister to the fraud detected at Punjab National Bank involving jewellers Nirav Modi and Mehul Choksi.
In line with the commitment made by Prime Minister Narendra Modi at the Gyan Sangam, the government no longer interfered in commercial decision making process of banks.
“(We have told you) we want you to be autonomous... When authority is given to the managements you are expected to utilise that authority effectively and in a right manner,” Jaitley said. “Therefore, the question for the management itself is were they found lacking. And on the face of it, the answer seems yes they were. You are found lacking when you are unable to check who amongst them were delinquent,” Jaitley said. Pointing out the failure of the auditors to detect the scam, Jaitley said, “What were the auditors doing? Both internal and external auditors really have looked the other way or failed to detect,” he said, adding that chartered accountants should introspect and take corrective steps. He also pointed out that these events pose a fresh setback to the banking system.
Jaitley also said the supervisory agencies will have to introspect and see what additional mechanisms have to be put in place.
The FM argued that such instances of fraud have a direct and an indirect cost. Besides the direct cost to the taxpayers, there is an indirect cost as it impinges on the lending capacity of banks.