UNION BACKS PATEL, SAYS RBI MUST ACT AS ALERT INSPECTOR
The employees union of the Reserve Bank of India (RBI) has, in a surprise move, backed Governor Urjit Patel for his stern action to stem the bad loan problem and other ills plaguing the public sector banks. The union, in a letter, urged him to actively continue monitoring of banks as an ‘alert inspector’ and not just as an ‘off-site surveyor’.
The union’s support came as a letter to the governor on Thursday from the All India Reserve Bank Employees Association (AIRBEA).
The move also comes within days of the bank officers’ unions moving the Delhi High Court challenging RBI’s decision asking banks to refer the 40 largest dud loan accounts to bankruptcy courts. They said the move would wipe out banks balance sheets, which might also have a cascading impact on their jobs. These 40 accounts constitute over 40 per cent of the dud loans in the system.
Earlier this week, the RBI governor had appeared before a Parliamentary panel where he had reportedly made a strong case for more powers to effectively regulate public sector banks.
To a query from panel members on the ~135-billion fraud committed by diamond merchant Nirav Modi and his associates at the Punjab National Bank (PNB), the governor had reportedly said it was impossible to look after each and every branch for audit purposes.
“You have stressed that it is not possible for RBI to inspect/audit the 120,000-odd bank branches spread over the whole country. That is unexceptionable. But that should not mean that RBI will totally withdraw itself from on-site supervision and rely on reports sent by banks taking those as sacrosanct,” AIRBEA said in the letter.
On the PNB scam, the unions said if the RBI believes that banking authorities are responsible enough to mind their operations and RBI can safely rely on them then that would definitely be a dereliction of duty.
“So, we strongly feel that RBI must remain in the scene, not only as an off-site surveyor but an active and alert inspector,” the letter said.
The union has also suggested RBI to undertake random but periodic supervision of bank branches across the country covering at least 10 per cent of branches across the regions on an annual basis.
Monitoring of banks by the RBI should be a triad — a combination of risk-based supervision, off-site surveillance and random on-site inspections of operational systems, the letter said.
“We feel this will give the best result instead of RBI totally dispensing with on-site inspections,” the unions said.
The letter said the RBI could train newly recruited assistants in banks for helping it in this monitoring exercise.
Patel reportedly told the House panel, headed by Congress leader Veerappa Moily, that the RBI has “inadequate” control over public sector banks and asked for more powers to regulate them.