You are here: Home » Finance » News » Banks
Business Standard

PNB fraud case: Assocham appeals govt to reduce 50% stake in PSBs

He called upon the Reserve Bank of India to take a lead and engage with the industry in finding ways to do clean business in the entire financial sector

Press Trust of India  |  New Delhi 

Assocham wants infra spend be increased to 10% of GDP

The fraudulent transactions of Rs 114 billion detected at should act as a strong trigger for the government to reduce its stake to less than 50 per cent in public sector (PSBs), industry body said today.

It argued that should then be allowed to function on the lines of private sector lenders with a full sense of accountability to their shareholders, protecting the interest of depositors.

The $1.77 billion (about Rs 114 billion) scam in involves billionaire jeweller Nirav Modi allegedly acquiring fraudulent letters of undertaking (LoUs) from a branch in Mumbai to secure overseas credit from other Indian lenders.

"The PSU banks, ironically, are slipping from one crisis to the other and there is a limit the government can keep bailing them out at the cost of taxpayers' money, even if it is the principal shareholder in these lenders, said.

It claimed that top banking positions are treated as extension of a government job and the senior most managements spend bulk of their quality time, receiving and implementing directions from the bureaucrats even for innocuous issues.

In the process, the core banking functions, including all important risk mitigation and management, take a back seat, it said.

Once the government equity in the is reduced below 50 per cent, there would be much more autonomy along with accountability and responsibility of the senior management, it added.

The boards should then be truly taking the policy decisions while the CEOs would run the with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions.

It observed that the problem has become more grave with the banking sector adapting to new technologies which can prove both boon and bane, depending on how effectively they are implemented.

Secretary General D S Rawat said it was time the industry also did some introspection.

While we seek more autonomy for the banks, we from the industry must also set certain standards for us for ensuring a clean and best banking and business practices, Rawat said.

He called upon the Reserve Bank of India to take a lead and engage with the industry in finding ways to do clean business in the entire financial sector, be it the public sector or private sector banks or even the non-banking companies.

First Published: Sun, February 18 2018. 14:30 IST
RECOMMENDED FOR YOU