Post Rs 11,400 crore scam at Punjab National Bank (PNB), Finance Ministry has raised concerns over the supervisory and inspection framework of the Reserve Bank of India (RBI). The Ministry has said that the given framework is not being properly implemented by the RBI.
Post Rs 11,400 crore scam at Punjab National Bank (PNB), Finance Ministry has raised concerns over the supervisory and inspection framework of the Reserve Bank of India (RBI). The Ministry has said that the given framework is not being properly implemented by the RBI, The Indian Express reported citing unidentified sources. The concerns have also been raised by the government over the CAMELS mode of supervision that the central bank follows to detect financial frauds in the country. CAMELS stands for capital adequacy, asset quality, management, earning, liquidity & system and control. PNB previous week reported that a scam to the tune of Rs 11,400 crore has taken place at its Brady Street branch in Mumbai. The bank alleged that companies controlled by diamond merchants Nirav Modi and Mehul Choksi. in connivance with a few bank officials. released many fake Letters of Understanding (LoU) to overseas branches of some of the domestic lenders.
RBI and Finance Ministry are discussing provisions under Banking Regulation Act which provide authority to the banking regulator to inspect account books of banks and act against the culprits and prevent financial frauds from occurring, the report further said citing same sources. There are other systems of controls with the central bank which empower it in regulating banking institutions such as quick verification of transaction reports, inspection of systems and audits and reconciliation of financial transactions on real time and nearly real-time basis. The government has also raised concerns on the powers enjoyed by the central bank to carry out inspections for getting companies’ compliance for norms under Foreign Exchange Management Act, 1999, the report added further.
Finance Minister Arun Jaitley on Tuesday this week had said that supervisory agencies have to implement addition mechanisms which make sure such cases are dealt with on time and also prevent such stray cases from becoming a pattern. There is an urgent need for the banking institutions in the country to execute prescribed measures to make the SWIFT operating system strong as it will in turn help to make the banking supervisory framework more strong in the country, RBI had said on Tuesday.