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Crisis in banking system has led to slowdown of investment flow: IL&FS

Besides PNB, private sector lender ICICI Bank is also embroiled in a controversy over alleged conflict of interest involving its CEO Chanda Kochhar

Press Trust of India  |  Mumbai 

Illustration by ajay mahanty
Illustration by ajay mahanty

The recent crisis in the country's system has impacted investor sentiments, leading to some slowdown in the investment flow, a top from IL&FS said.

The crisis, however, gives an opportunity to improve the overall processes and to built up a strong system, IF&FS managing director and chief executive officer, Ramesh Bawa, said on Wednesday.

When asked about the extent of impact of the crisis, Bawa said, "Huge...It (crisis in system) has already impacted investors sentiments."

In February, second largest public sector detected fraudulent transactions at one of its branches in The biggest ever banking fraud of more than Rs 130 billion was allegedly committed by billionaire diamantaire and his associates in connivance with some officials of a branch of the

Besides PNB, is also embroiled in a controversy over alleged conflict of interest involving its and business dealings of her husband

Another private lender, Axis Bank, recently saw curtailment of tenure of its to seven months following a nudge by the in the wake high levels of non-performing assets (NPAs) in the bank.

Bawa termed the crisis as only a temporary phenomenon, adding, "The investment flow (into the country) has become slow, but it is only for the time being."

He said it is not possible to suppress investors' concerns in such events.

"They (investors) are certainly bound to ask you that even if you don't find a fault with an individual institution or a person, but the system seems to be weak," he said.

Last month, the International Monetary Fund's had said banking reforms like insolvency code and recapitalisation will be ineffective unless governance standards are improved.

Without naming the Punjab National Bank, he had said the scam has "revealed the necessities and urgencies to improve the internal controls", which is crucial not only for improving but also "financial stability".

Bawa appreciated the steps taken by all the stakeholders, including the government in dealing with such situations in the banking system.

Referring specifically to the PNB fraud, he said, "The best thing the government or the ministry had done is that on the day-one they gave a statement that all the liabilities (arising out of the fraud) need to be borne by the PNB. This has given a relief to the investors.

First Published: Wed, April 11 2018. 22:44 IST