New Delhi [India]: In lieu of the ongoing fraudulent transaction scam involving Punjab National Bank, the ASSOCHAM demanded that the government to reduce its stake in banks to less than 50 percent.
“Public sector unit (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. Fraudulent transactions worth Rs 11,300 crore should act as a strong trigger for the government for reducing its stake to less than 50 percent in the banks,” the ASSOCHAM said on Sunday.
Furthermore, the chamber urged that banks should be allowed to work on the lines of private sector lenders with a full sense of accountability to their shareholders, protecting the interest of depositors.
“The top banking positions are treated as an extension of a government job, with the senior-most management spending quality time receiving and implementing directions from bureaucrats, even for innocuous issues. In the process, core banking functions, including all important risk mitigation and management take a back seat. The problem has become more grave with banks adapting to new technologies which can prove both boon and bane, depending on how effectively they are implemented,” ASSOCHAM in a statement.
Once the government equity in banks is reduced below 50 percent, the chamber said there would be much more autonomy along with accountability and responsibility of the senior management. The boards should then be truly taking the policy decisions while the CEOs would run the banks with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions.
“There is an onus on India Inc as well. There are two sides of a coin. If one side represents the bank management, the other side which involves the borrowers, mostly the large sized corporates, represents India Inc. Any unsavoury incident then leaves both sides of the coin smudged. The industry also needs some introspection. While we seek more autonomy for the banks, the industry must also set certain standards to ensure clean and best banking and business practices,” said DS Rawat, General Secretary, ASSOCHAM.
Rawat further called on the Reserve Bank of India (RBI) to take a lead and engage with the industry in finding ways to cleanse operations in the entire financial sector, be it public, private sector or even non-banking finance companies (NBFCs).
Punjab National Bank detected a 1.77 billion dollars scam in which jeweller Nirav Modi acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.
The scam was started in 2011 and was detected in the third week of January this year, after which the PNB officials reported it to the concerned agencies. (ANI)