Laws may be tightened to punish fraudsters: Jaitley
Finance Minister Arun Jaitley on Saturday blamed the inadequate oversight by regulators and auditors as well as a careless bank management for the ~114 billion fraud at Punjab National Bank.
He said the law would be tightened, if needed, to punish the fraudsters.
Speaking for the second time this week on the PNB fraud, Jaitley slammed the lack of ethics in certain sections of businesses and said multiple layers of auditing had chosen to look the other way or had done a casual job.
Without naming either jeweller Nirav Modi or PNB, Jaitley said it was “worrisome” that no red flag was raised when the fraud was perpetuated.
Speaking on the sidelines of The Economic Times Global Business Summit, he added it was worrisome that top managements were either indifferent or unaware.
“I think who did what will eventually be revealed in the course of the investigation,” Jaitley added.
“Regulators have a very important function. They ultimately decide the rules of the game and they need to have a third eye, which should be perpetually open,” the finance minister said.
“Unfortunately in the Indian system, we politicians are accountable, the regulators are not. Frauds call for tightening regulations where they are lacking,” he said.
“The law would be tightened further, if necessary, in order to find out where they (fraudsters) are and what extreme action the law permits against such delinquent persons,” he added.
Jaitley said Indian businesses should develop a habit of indulging in ethical practices. “Those who deviate from that cause must always remember that the consequences will not only be commercial and civil.”
Stating that unethical practices in lender-borrower relationships should end, he said the initial experience of the Insolvency and Bankruptcy Code, where recoveries are made from corporate loan defaulters by selling assets, had been reasonably transparent and objective.
“Ethical practices are a significant problem in India,” he said, adding that Indian businesses should look inward rather than asking what the government was doing.
On mounting non-performing assets, he wondered how much was due to business failure and how much was because of diversion by companies. “Cases of wilful defaults are something much more than business failure,” he said. The finance minister said periodic bank scams pushed reforms to the background while the scars on the economy took the front seat.
Earlier this week, Jaitley had said “supervisory agencies” needed to “introspect as to what additional mechanisms they would have to put in place to ensure that stray cases did not become a pattern. “It is incumbent on us as a State... to chase these people to the last possible conclusion to make sure the country is not cheated,” he had said.