(LiveMint)
Reserve Bank of India (RBI) governor Urjit Patel broke his silence on Wednesday on the PNB fraud, putting up a blistering defence for the regulator and sought to put the onus on the finance ministry instead.In a speech laced with melodramatic phrases delivered at the Gujarat National Law University (GNLU) in Gandhinagar, Patel claimed, “RBI’s regulatory powers over public sector banks are weaker than those over the private sector banks.”
Effectively, the governor has blamed the diluted regulatory structure for the lapses in oversight and thereby put the ball back in the court of the Union government. In the process, Patel has revived the blame game on the over $2 billion PNB fraud. His remarks have also provided fodder for the opposition to politically target the ruling Bharatiya Janata Party (BJP). A finance ministry spokesperson refrained from responding immediately, saying “it is not proper to comment at the moment”.
Patel called on the government to strengthen the Banking Regulation Act, 1949 to ensure that the regulator has enough teeth to adequately regulate PSU banks and to make its regulatory powers “ownership neutral”. According to him, the amendments made to the Banking Regulation Act have led to “emaciation” of RBI’s powers with respect to corporate governance issues at PSU banks, one of the reasons for financial frauds at banks.
