More powers for RBI: Goyal says govt open to Patel plaint

Finance Minister Piyush Goyal on Tuesday said the government is open to discuss the issue of autonomy and ‘ lack powers’ of the Reserve Bank of India (RBI) in regulating state-run banks, which the central bank feels is the main reason for the spate of scams that public sector lenders are grappling with.

Following criticism that the RBI also has to be blamed for the biggest financial scam in the country — the ~143 billion Punjab National Bank scam — Governor Urjit Patel had blamed it on the lack of powers the central bank to control the state-run banks.

“As regard the RBI powers, we are examining it and that is an issue that we will sit with the RBI and will sort out. The government has an open mind on this issue,” Goyal said, when asked about the concerns raised by Patel in March wherein he had rued that the central bank did not have enough powers to regulate the staterun banks.

Addressing an event at the Gujarat National Law University in Gandhinagar on March 14, Patel had sought more powers for the RBI to deal with frauds at public sector banks (PSBs), saying the current enforcement mechanism was “not perceived” to be a major deterrent for fraudsters.

The governor had also spoken critically of the ownership structure of PSBs, saying regulatory powers are “not” ownership neutral as the RBI’s powers over PSBs are “weaker than” those over the private sector banks.

Stating that the RBI has “very limited authority” on PSBs, Patel had said that in the present scenario the RBI could not remove PSB directors and management, could not enforce mergers in PSBs nor it could trigger liquidation of state-owned banks.

On more fund infusion for the near-crippled PSBs, Goyal said “the government will provide whatever capital it takes to ensure orderly management and running of all PSBs.”