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