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RBI Governor Urjit Patel calls for more powers over state-run banks in wake of PNB fraud

Reuters  |  MUMBAI 

(Reuters) - The Reserve of chief said on Wednesday that it had "very limited authority" over state-run and called for reforms in the wake of a $2 billion fraud to give the regulator the same powers to police state-run as it has over

Reserve of (RBI) defended the central bank's role in the aftermath of the Punjab National (PNB) fraud case and launched an indirect broadside against the Indian government, which has been critical of the role of the regulator and auditors in failing to spot the huge alleged scam.

In a speech at a in the Western Indian state of Gujarat, Patel said there were numerous limitations in the RBI's powers over state-run lenders, such as its inability to remove directors, replace management, push through a merger or initiate liquidation.

While the RBI regulates all in India, state-run are also regulated by the government, which owns majority-stakes in them.

This has, in effect, led to a system of "dual regulation", said Patel, adding that this "fault line is bound to lead to such as the most recent fraud".

The unravelling PNB fraud, the biggest in Indian history, has stunned the financial sector and pushed the RBI and government to crack down on systems and lending practices.

(Reporting by Abhirup Roy, Devidutta Tripathy, Sankalp Phartiyal; Editing by and Alex Richardson)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, March 14 2018. 19:25 IST