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Top officials of key economic ministries, Reserve Bank of India and Punjab National Bank, besides some other banks, have been on an alert 24X7 ever since the scam broke a few days ago, and the holiday was the last thing on anybody’s mind on Sunday.
“The government is very serious about the matter and is in a hurry to get to the bottom of it all,” a source told Business Standard.
As to why Prime Minister Narendra Modi or, for that matter, Finance Minister Arun Jaitley, both travelling, have not spoken on the scam or reassured bank consumers yet, the source said, “It’s important for the government to ensure investigation is conducted quickly.
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It may not make sense for the PM to speak at this moment without knowing all the facts.” Another source added that in the year before the general elections, the government has to be cautious about any statement related to the safety of public money after such a big bank fraud. On the political front, however, the BJP and Opposition parties have continuously lashed out at each other on who’s responsible for the scam.
As for action, apart from the raids and arrests, the Prime Minister’s Office (PMO) has been on an overdrive holding meetings related to the lapses in the banking system and the way forward. The PMO is directly dealing with officials of the Department of Financial Services to control the damage, it is learnt. PMO officials could not be contacted for comment.
The Ministry of Corporate Affairs, which had in the past ignored a whistleblower’s complaint regarding a bank fraud, is learnt to be moving swiftly now. A top official in the ministry said, “The SFIO (Serious Fraud Investigation Office) probe has been ordered and comprehensive action is underway.”
Bureaucrats in the know said the Reserve Bank of India (RBI), which has started a supervisory assessment of control systems in PNB, would be able to take action in about two months. The RBI expects the assessment to show if the systemic failure was only in PNB or in the overall banking universe, according to a government official.
The role of the RBI as regulator has been questioned by some, including the finance ministry’s chief economic advisor, Arvind Subramanian, in this.
When asked, a former cabinet secretary said: “The RBI will have to take a close look at the mechanisms for reconciling contingent liabilities of this kind with Nostro accounts, SWIFT messaging system and the core banking system.”
He added that the ‘’failure of successive internal, external and RBI audits and the reporting systems to detect the leak reveals there are gaps to be plugged”.
However, there are many who believe gaps are tough to plug in public sector banks because of an overdose of “venal culture’’, as a former finance secretary described it. “This is a wake-up call for the government to go below 51 per cent and give up management control. At best, one or two banks may be retained in the public sector,” he said, adding that no government seems to be willing on that. Scams happen everywhere around the world, but the probability is much higher in public sector banks, according to him.