RBI Governor Urjit Patel appeared before the parliament's standing committee on finance
Highlights
- Nirav Modi has refused to return to India despite multiple summons
- He is believed to be trying for political asylum in the UK
- His relative Mehul Choksi is also accused of bank fraud
Facing tough questions from parliamentarians on the Nirav Modi scam and bad loans hitting state-run lenders, RBI Governor Urjit Patel said today that the regulator had limited powers to act against public sector banks like Punjab National Bank (PNB).
"They are not completely under our control and we have no role in removal or appointing the chairman and managing directors, granting licenses and a host of other measures. We have asked Government to give us more powers to exercise control over public sector banks," said the RBI governor, appearing before the Parliament's Standing Committee on Finance.
The committee headed by Congress's Veerappa Moily includes leaders from several parties besides former Prime Minister Manmohan Singh.
PNB fraud: Nirav Modi has refused to return to India despite multiple summons by the CBI
Sources have told NDTV that the lawmakers grilled the regulator on the Rs 13,000 crore PNB fraud that they said took place despite the RBI's checks and balances and raised questions on the quality of monitoring.
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Nirav Modi fled India in January nearly a fortnight before PNB, India's second-largest government bank, detected the fraud. Nirav Modi allegedly managed thousands of crores in loans he never paid back, using fake guarantees supplied by PNB officials at a branch on Mumbai.
The billionaire, who has refused to return to India despite multiple summons by the CBI, is believed to be
trying for political asylum in the UK.
Sources say a senior parliamentarian questioned Urjit Patel how Nirav Modi managed his illegal transactions for several years "despite the RBI's supervisory norms". Mr Patel was also asked who was accountable for the failure.
PNB scam: The state-run Punjab National Bank (PNB) was hit with a Rs 13,000 crore earlier this year
How were fake LoUs (Letters of Undertaking) going around for several years and why did the RBI fail to notice, Mr Patel was asked by MPs. "Why didn't RBI check the credentials? RBI has powers to check and investigate every branch anywhere. Why didn't it use the power," the RBI chief was asked by a senior parliamentarian.
Blaming PNB and its directors for the scandal, Mr Patel replied that the RBI had no option but to rely on the internal control system of banks. "We do not constitute an audit of banks and do not seek to replace it, this was consciously done," he told the MPs.
Mr Patel said PNB furnished a "factually incorrect compliance report" that measures had been implemented, even after the RBI had cautioned banks confidentially about similar fraud in another bank.
The CBI has asked the Interpol to issue a Red Corner Notice against Nirav Modi, which means member countries can arrest and deport or extradite him.
There are 21 state-owned banks, including the State Bank of India. Their combined losses crossed Rs 87,300 crore this year, topped by PNB. Only two banks, Indian Bank and Vijaya Bank, posted profits.