A lot happened in banking this week.
In an eventful week for the country's banking sector, authorities moved swiftly in a case involving alleged improprieties over dealings of a top private bank, the RBI cracked down hard on cryptocurrencies such as bitcoin, even as the silence of central bank chief Urjit Patel on bank governance issues rang loud at a policy event.
This week, the Central Bureau of Investigation questioned Rajiv Kochhar, brother-in-law of ICICI Bank chief Chanda Kochhar, and reportedly put out lookout notices for Chanda Kochhar, her husband Deepak Kochhar and Videocon promoter Venugopal Dhoot.
The investigation agency is looking into a Rs 3,250 crore loan sanctioned by ICICI Bank to the Videocon Group in 2012 -- a large portion of which has now become NPA – and in a deal which allegedly smacks of nepotism, conflict of interest and corruption.
Moreover, the Income Tax Department has issued a notice to Deepak Kochhar, husband of Chanda Kochhar, in connection with its tax evasion probe in the same case.
The bank’s Board has already defended Kochhar twice, and has ruled out any quid pro quo in the loan.
Arvind Gupta, the whistleblower in the controversy, has alleged that ICICI bank chief was the beneficiary in the loan deal and he wants the government and regulators to check on the lending practices of the banking system.
On Thursday, the monetary policy committee headed by RBI chief Urjit Patel announced a status quo in the monetary policy rate, but dodged a question relating to RBI’s views and actions on the governance issues at private sector banks, namely - ICICI Bank and Axis Bank -- as is widely reported in the past few weeks.
The question was based on the last month’s speech given by the Governor at a Gujarat university where he pointed out the legal and regulatory constraints by RBI to take action on public sector banks unlike its private peers.
Reports suggest that RBI has asked Axis Bank to reconsider the fourth term of its CEO and MD Shikha Sharma. It is said that the banking regulator has asked the lender to shorten the reappointment to one year (from three years) and scout for a new successor soon.
In parallel, developments in the PNB case relating to fraud worth over Rs 13,000 crore allegedly involving Nirav Modi’s firms and Mehul Choksi’s Gitanjali Group, saw CBI question current officials of RBI along with former Deputy Governor H R Khan
Apportioning blame to the RBI, the Central Vigilance Commissioner (CVC) K V Chowdary said there had been "no apparent audit" by the central bank during the period of the scam.
Since the scam broke out on February 14, barring the one-way communication through the speech in Gujarat, the RBI has so far maintained a sullen silence on the subject.
Facing the heat over the scam, PNB has assured its depositors of the safety of their money with them.
RBI Policy announcements
During the monetary policy announcement, in relief to banks, RBI deferred the adoption of Indian Accounting Standards (Ind AS) for one year, due to unpreparedness of banks to migrate to the new accounting system. It was due for implementation from April 1.
Bitcoins and cryptocurrencies
In what is being seen as a regressive move on cryptocurrencies such as Bitcoins, RBI showed its displeasure towards its usage and came down heavily on all the regulated entities under the central bank asking them to discontinue dealing with entities dealing with virtual currencies, including Bitcoins, latest by July 5.
However, given the rise of the online or virtual currencies, RBI said one of its inter-departmental group will study the desirability and the feasibility to introduce a central bank digital currency. The report will be submitted by end-June 2018.Additionally, just before the year end, RBI attempted to assuage balance sheets of banks by helping them stagger their treasury losses up to four quarters providing them a much required breather on mark-to-market losses due to the rise in bond yields and lower prices in Q3 and Q4.