PNB fraud underlines need for more privatisation: Arvind Subramanian

Public ownership creates a complicated three-way line of control - ownership and regulation between the government, the regulator and the banks themselves, says CEA

After state-owned Punjab National Bank (PNB) was jolted by a Rs 114 billion fraud, the government’s chief economic advisor Arvind Subramanian, had raised several questions on the external controls used by the Reserve Bank of India (RBI). He tells Dilasha Seth internal controls are weak in public sector banks (PSBs) and this calls for the privatisation. Edited excerpts:

Another big crisis in the public sector banking space has surfaced. What should be the response at the policy level? 
 

In the PNB episode, it is clear the internal controls broke down. But, what about the external controls by the regulator?