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PNB fraud: Urjit Patel says RBI has 'limited authority' over PSBs

By Deepika
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    The Reserve Bank of India (RBI) chief Urjit Patel on Wednesday, defended the regulator role, saying that it had "very limited authority" to hold state-run banks accountable.

    Urjit Patel

    Breaking his silence on PNB scam, RBI governor said it is difficult for it to be present everywhere to contain such instances. Patel was speaking Gujarat National Law University.

    He further said that we at the Reserve Bank of India also feel the anger, hurt and pain at the banking sector frauds and irregularities.

    Patel also said that banks can keep large buffers in their capital structure to bear the losses which occur due to such frauds.

    Patel said that the RBI is working to break the nexus of some banks and businesses cleary hinting at the PNB scam where diamantaire Nirav Modi colluded with some bank employees to pull off the massive scam.

    Urjit Patel said that section 51 of the amended Banking Regulation Act of 1949, which grants RBI the power to regulate all commercial banks including the PSBs, has clearly emaciated the RBI powers on corporate governance at PSBs.

    RBI cannot force a merger in the case of PSBs as per Section 45 of the BR Act. Furthermore, in a remarkable exception of sorts, in some cases there is duality of Managing Director and the Chairman - they are the same - implying the MD is primarily answerable only to himself or herself.

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