Letter to BS: Check for fraud in NPAs above Rs 500 mn, says govt

This refers to the report “Check for fraud in NPAs above Rs 500 mn: Govt” (February 28). On the face of it, there is nothing extraordinary in the owner of a business giving operational instructions to the staff working under him. The government of India as the owner has the responsibility to ensure a smooth functioning of public sector banks (PSBs) and the recent developments have shaken public trust in PSBs.

In the given situation, the divergent instructions flowing from the government and the Reserve Bank of India (RBI) will confuse the already strained managements of PSBs. They will, more likely, start waiting for instructions from North Block even after getting instructions from the RBI, as it is the Ministry of Finance that decides the fate of the top management in PSBs.

This is an embarrassing situation for the country’s central bank which shoulders the responsibility of working under the RBI Act and administering banking regulation as legally mandated by the Banking Regulation Act, 1949. If the government is not comfortable with the speed at which instructions are percolating down to banks from the RBI, they should have a dialogue between them and sort out the issues. It is not in public interest for the two being seen talking differently. The owner and the regulator have different kinds of responsibilities. The earlier it is conceded, the better for the image of the Indian financial system.

M G Warrier  

Mumbai