tough task

Source: The Hitavada      Date: 14 Jun 2018 12:18:10

RESERVE Bank of India’s Governor Dr. Urjit Patel deserves full sympathy from the nation when he asks for more powers to tackle the problems of the Public Sector Banks (PSBs) whose accumulated loss in fiscal ending March 2018 amounts to a whopping Rs. 87,000 crore. To the Parliamentary Standing Committee on Finance, Dr. Patel has urged for more powers so that he would be able to regulate the public sector banks effectively. In a way, Dr. Urjit Patel has sought to take tough action against PSBs that are fraught with countless frauds, but needs more powers to be able to achieve that task. This was the crux of his presentation before the Standing Committee on Finance. 

The issue of more powers to the RBI has come up in such an emphatic manner for the first time. Yet, previous RBI Governors, too, had asked for more powers to tackle the banking crisis that was looming large for the past twenty years. Dr. Patel deserves appreciation for his courage to state facts as they are. Reportedly, he has insisted upon the full accountability of the Boards of Directors of the PSBs in cases of frauds or mismanagement of non-performing assets (NPAs). In order to make the Boards of individual banks more responsible and accountable, he has tried to reduce the responsibility-quotient of the Central Bank in nuts-and-bolts management of the PSBs. This courageous stand is most welcome, particularly against the background of the huge losses the PSBs have been suffering.

The issue of full accountability of the Boards of Directors of individual banks in public sector needs to be considered in complete depth. Factually speaking, this issue must be applicable to private sector banks as well. For, what happened in the ICICI Bank as regards loans to a company in which the husband of Bank CEO Mrs. Chanda Kochhar was a party, is good enough an example of full accountability of the bank’s Board. But, presently limiting the discussion to PSBs, we tend to agree fully with Dr. Urjit Patel for making his point effectively.

A critical point must be considered more fully at this stage. The Punjab National Bank (PNB) had insisted post-Nirav Modi fraud that it was subjecting its transactions to the annual risk audit by the RBI. The effort of the PNB was to reduce the share of responsibility and accountability in the fraud that duped the bank of thousands of crores of rupees. To certain extent, the PNB was right, too. But this precise point lends a greater weight to Dr. Urjit Patel’s argument in favour of more powers to the RBI. For, as Dr. Patel seems to suggest reportedly, that even the annual risk-audit had its limitations in absence of appropriate powers. True, in some quarters, this may be read as an escapism. In such a scenario, it would be appropriate for the Government to study this angle of more powers to the RBI in all details and dimensions and then only arrive at whatever conclusion. A hurried ‘yes’ or ‘no’ would not serve the right purpose.

Dr. Patel’s appearance before the parliamentary Standing Committee on Finance comes at a critical moment when the nation has just known about the massive and stunning cumulative loss to the public sector banks in one fiscal. It is a matter of great concern that only two banks have recorded profits while others have suffered debilitating losses. The nation looks to Dr. Urjit Patel as a possible saviour of Indian banking. His task is certainly tougher than most may think. If he has to succeed in ensuring better regulatory regime for the banking sector, then the Government will have to give the most serious thought to the demand for more powers to the Reserve Bank. A possible solution can emerge, however, only if the Government pushes aside the political component in decision making and turn to complete and uncompromising professionalism.