Kotak Mahindra Bank MD Uday Kotak says that he is ’embarrassed as a banker’ in light of the Rs 11,400 crore fraud at the Punjab National Bank (PNB) in which diamond czar Nirav Modi allegedly colluded with a former bank employee, obtained fake LoUs, and flew abroad.
“I continue to believe that I am embarrassed as a banker and even more as a part of a financial sector in terms of what has happened, which is in addition to stress in the financial sector,” Uday Kotak said in an interview with CNBC-TV18.
This is not the first time when Uday Kotak has expressed aversion to the state of the banking system in India. Recently, he said that he was ashamed about the problem of the stressed assets which grew as a grass under the feet. To deal with big bad loans and frauds, Uday Kotak strongly pitched for institutional thinking and better governance.
Unlike Godrej chief Adi Godrej, Uday Kotak did not clearly call for the privatisation of public sector banks (PSBs), but he did flag the ownership and governance issues leading to the banking crisis. He said that there are two major areas in the future banking system and that is governance and ownership of banks.
“Time is now for significant policy and institutional thinking on governance and ownership of banks rather than more talk… focus must be on the institutional framework for fixing key issues and not finger pointing at banker or regulator or anybody else,” he told the news channel.
In the light of the PNB fraud, industry bodies FICCI and Assocham urged the government to privatise PSBs as the problem is deep-rooted and government’s bailout plan is not enough to fix it. Adi Godrej seconded the thought, saying that there were fewer or no cases of fraud at private banks.
The brewing fraud at India’s second largest state-owned lender went unnoticed for years before it was detected in the third week of January. Nirav Modi, along with his wife, brother and close aide Mehul Choksi was booked by the Central Bureau of Investigation (CBI) on January 29.
So far, several arrests have been made and raids have been conducted. According to reports, besides arresting bank employees, the CBI has also arrested Nirav Modi’s close aide Vipul Ambani in the case. The CBI along with the Enforcement Directorate (ED) has conducted raids over 60 locations. The probe agencies have claimed to have seized gold, diamond and jewellery worth over Rs 5,000 crore.
Nirav Modi reportedly left the country at the beginning of the year, before the fraud was detected at the bank. In a letter, he blamed the bank for blowing the issue out of proportion and garnering too much media attention and express inability to repay in light of the developments.
A multi-agency probe in the case is currently undergoing, while Finance Minister Arun Jaitley has rapped auditors and bankers for either looking away or failing to detect the fraud.