scrutinise RBI

Source: The Hitavada      Date: 05 Apr 2018 11:28:41

THE statement of Central Vigilance Commissioner (CVC) Mr. K.V. Chowdary points to an unfortunate ugly truth that the Reserve Bank of India (RBI) did not conduct a proper audit during the period when the Rs. 13,000-crore scandal hit the Punjab National Bank (PNB). This statement also highlights another reality that the PNB had made an assertive claim that the RBI had been conducting its “risk-based” annual audits all along and did so even in the year the scandal took place. Obviously, there are reasons to infer that the RBI audit was flawed and was not carried out with due diligence and forensic criticality.

Even as many banking frauds of varying sizes have been surfacing in the country in recent times, doubts too sprang up about the efficacy of the Reserve Bank to operate an appropriate checks-and-balances system to monitor what the banks did. It is obvious that the banks’ operations were flawed as many people in high places developed unholy nexuses to favour some elements in business, most possibly aided and abetted by political vested interests.
The statement by Central Vigilance Commissioner Mr. K.V. Chowdary made a critical point that there was a serious flaw in the RBI’s audit during the period when the PNB was hit by the scandal of diabolical proportions. It is this point that needs to be taken into consideration when an in-depth investigation is launched into various banking scandals across the country, the recent among those being the one in the ICICI Bank whose Chief Executive Officer is the legendary Mrs. Chanda Kochhar, known so far for her uprightness and correct professional conduct.

The allegation is that Mrs. Kochhar favoured her husband, Mr. Dipak Kochhar, in what is being described as a ‘sweetheart deal’ to favour the Videocon Group. Though the ICICI Bank management has denied any wrongdoing in this particular case, initial investigations are revealing some flaws in the system allowing some favours being showered upon some chosen people. Even as allegations and clarifications fill the air, Mrs. Chanda Kochhar is reported to have decided to abstain from an event at which she was to be a guest of honour and felicitated by the President.

These details apart, what is necessary for the Government is to launch a parallel forensic audit of the method and manner of the RBI as well so that future banking scandals are blocked before they take place. Many experts have suggested a thorough re-look at the RBI’s functioning as well. These suggestions cannot be overlooked casually. For, what is at stake is not a few thousand-crore rupees but the core trust the nation must harbour in the banking system as fully above board. There is no doubt that the RBI has had many legendary Governors who made signal contributions to the nation’s economic management and monetary policy-making. Until now, there was no one raising a doubt about the RBI’s integrity. Now also, the issue does not seem to pertain to the RBI’s institutional integrity, but to its operational efficacy.

There is a need to ensure that the RBI works at the peak of its operational competence all the time. It is true that the Government has always allowed the RBI to function as an autonomous institution. This status has been maintained mostly in the past fifty-plus years. But when banking scandals are surfacing one after another and when fingers are being pointed to the RBI’s flawed monitoring, then it becomes necessary to start taking an in-depth re-look at the RBI and its operations and checks-and-balances systems. This does not mean to point to certain decadence; this is only to suggest abundant precaution.