This refers to your editorial “Failures of supervision” (September 30) regarding the deficient role of the Reserve Bank of India (RBI) in the crisis plaguing the Punjab and Maharashtra Co-Operative Bank (PMC). The co-operative movement in India was started with an act of Parliament in 1914, primarily for dealing with the problem of rural credit and to encourage “thrift, self-help and cooperation among agriculturists, artisans and persons of limited means”. Being so, how PMC could have had an exposure of Rs 6,500 crore (which is 73 per cent of the bank’s total assets) vis-a-vis the bankrupt Housing Development & Infrastru-cture Ltd (HDIL) and continue to report the same as “standard asset” for long, without so much as causing an eyebrow to be raised in the RBI, are all questions that baffle the common man.
If, as is being alleged, the RBI has taken strong action against PMC only after the bank, on its own, reported its misclassification of bad loans, it is, indeed, a poor reflection of the former’s supervisory role. Dual control over co-operative banks by the RBI and the Registrar of Cooperatives (RoC) is only a lame excuse.
“People don’t make mistakes, processes do,” swear quality gurus. It is high time the RBI tightened its audit and information gathering processes to ensure that its officers do a thorough job of supervising banks, NBFCs and housing finance companies that it is entrusted with. Else, we would continue to witness the sad spectacle of innocent depositors and other bank customers being put to hardship due to such late regulatory interventions that are akin to closing the stable doors after the horses have bolted.
V Jayaraman, Chennai
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