Nirav Modi Scam: Bank Officers Hold RBI Responsible

Pointing out failures of the RBI and the Centre, the banking sector has expressed that PSBs play a key role in the Indian economy that needs a strong system to expand on the growth trajectory.

- Bharat Hiteshi

As the country reels under the shock of multiple bank frauds and the potential impact of lakhs of crores of bad loans in the banking system, the All India Bank Officers’ Confederation (AIBOC) has asked the government to stop the blame game in bank frauds and instead make the Reserve Bank of India (RBI) take responsibility for introducing new systems and for failure in bank supervision.

Regulatory agencies, including the central bank, need to become more vigilant and the role of auditors needs to be probed further. Banks are already being audited multiple times and, hence, there is need for a regulatory agency to make sure that auditors are playing their due role. As the Nirav Modi-Punjab National Bank (PNB) scam unfolds, it is clear that those who were to monitor transactions failed at their job.

It must be recalled that one of the fallouts of the scandal surrounding the US energy company Enron was the closure of reputed accounting firm Arthur Andersen. In our country too, stern action must be taken against auditing agencies. At the same time, greater autonomy needs to be given to state-run banks. The issue of appointments of bank chiefs, for instance, is a key issue meant to be handled by the relatively new Banks Board Bureau. Instead, it seems to remain within the purview of the Finance Ministry. All these issues will now have to be reviewed and overhauled in light of the worsening news from banks.

The Bank Officers Confederation had earlier objected to banks being burdened with the responsibility of Aadhaar enrolment, which is now a bigger and more dangerous issue given the impunity with which bank officials have participated in fraud. However, the Bank Officers Confederation has a different take and makes some important points about the accountability of regulators and the government.