Want more pow­ers to reg­u­late PSBs ef­fec­tively: RBI Gover­nor tells panel

The Hitavada - - PASTIME -

RBI Gover­nor Ur­jit Pa­tel on Tues­day made a strong case for more pow­ers to reg­u­late Pub­lic Sec­tor Banks (PSBs) ef­fec­tively as law­mak­ers asked him tough ques­tions over in­creas­ing bad loans and frauds.

As per sources, Pa­tel also in­formed the Stand­ing Com­mit­tee on Fi­nance that

RBI is in com­mu­ni­ca­tion with the Govern­ment for dis­con- tin­u­ing the prac­tice of ap­point­ing RBI nom­i­nees on boards of PSBs to avoid to any con­flict of in­ter­est be­tween the reg­u­la­tor and reg­u­lated en­ti­ties.

Pa­tel was asked about bad loans, bank frauds, cash crunch and other is­sues, said sources. They also said he as­sured the panel mem­bers that steps were be­ing taken to strengthen the sys­tem. Regarding PSBs, Pa­tel told the panel that RBI has “in­ad­e­quate” con­trol over them and asked for more pow­ers to reg­u­late them.

RBI has cited at least 10 ar­eas where it has no con­trol over PSBs. These in­clude, power to re­move chair­man, di­rec­tor or CEO of a Sta­te­owned banks and im­pose restric­tion on com­mon di­rec­tors on PSB boards. There are 21 State-owned banks, in­clud­ing State Bank of In­dia.

The gross non per­form­ing as­sets (NPAs) or bad loans of PSBs stood at Rs 7.77 lakh crore at end De­cem­ber 2017. The to­tal NPAs of all banks (in­clud­ing pri­vate) was a whop­ping Rs 8.99 lakh crore.

Pa­tel also told the panel, headed by vet­eran Congress leader M Veer­appa Moily, that there should be no cen­tral bank nom­i­nee on the boards of PSBs, sources said. The Cen­tral Bank, he said, was dis­cussing the mat­ter of RBI nom­i­nee di­rec­tor with the Fi­nance Min­istry.

He cat­e­gor­i­cally said that the pri­mary and col­lec­tive re­spon­si­bil­ity to con­tain frauds in the banks rests with its board, ac­cord­ing to the sources.

Em­pha­sis­ing on the di­rec­tor’s role, Pa­tel in a writ­ten re­ply to the panel said the main role of a di­rec­tor on the bank’s board, in­clud­ing nom­i­nee di­rec­tor, is to en­sure that the bank is man­aged ef­fi­ciently and pro­fes­sion­ally, sources said. Pa­tel was asked ques­tions regarding gov­er­nance is­sues in ICICI Bank and Axis Bank.

The pro­pos­als com­ing be­fore the board and its com­mit­tees are con­sis­tent with nor­mal bank­ing prac­tices, guide­lines of the govern­ment, RBI and are not vi­ola­tive of any law, he said.

“RBI nom­i­nee di­rec­tors should be

the Gover­nor as say­ing with re­spect to the NPA sit­u­a­tion.

Strik­ing an op­ti­mistic note, Pa­tel in­formed the com­mit­tee that af­ter im­ple­men­ta­tion of the In­sol­vency and Bank­ruptcy Code (IBC), the sit­u­a­tion on the NPA front has been im­prov­ing.

There have been rising con­cerns about bad loans, health of var­i­ous pub­lic sec­tor banks and fall­out of the nearly Rs 13,000 crore fraud at the Pun­jab Na­tional Bank.

TMC leader and mem­ber of the panel Di­nesh Trivedi had said on Mon­day: “It’s been long time and the RBI has still to come out with amount of the cash re­turned into sys­tem post de­mon­eti­sa­tion. And the Gover­nor must share these de­tails with the panel and I hope he will do it to­mor­row.”

Ur­jit Pa­tel

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