Beena Parmar Moneycontrol News
In his first press conference after the recent scams and controversies in the banking sector, Reserve Bank Governor Urjit Patel parried questions on lapses in private sector banks.
When asked for his views on the recent lapses in private banks, which followed shortly after his public remarks on RBI’s lack of powers to regulate public sector banks, Patel said, “Those are two different issues and they are not related.”
“What was said in the speech and the debate around it relates to the legal powers that RBI has which seem to be asymmetric between public sector banks and private sector banks and therefore that has got nothing to do with our supervisory and regulatory action on any bank concerned,” he said.
The question was in reference to reports accusing ICICI Bank's leadership of grave governance lapses in loans given to the Videocon Group. A whistle-blower’s letter to the Prime Minister’s Office flagged the loan by Videocon founder Venugopal Dhoot to a firm controlled by Deepak Kochhar, the husband of ICICI Bank CEO and MD Chanda Kochhar.
Separately, a report also said that RBI had asked Axis Bank's board to reconsider appointing Shikha Sharma as the bank’s CEO and MD for a fourth term, amid the bank's poor performance.
Patel has spoken out only once ever since the Rs 13,000 crore-plus fraud at Punjab National Bank fraud came to light on February 14, less than a week after the sixth bi-monthly monetary policy for the previous financial year.
Last month, the CBI filed a case against a Chennai-based jeweller, Kanishk Gold, for defrauding a consortium of 14 banks led by the State Bank of India, of Rs 824.15 crore.
A couple of days later, the agency filed a case against Hyderabad-based Totem Infrastructure for allegedly defrauding a consortium of eight banks led by Union Bank of India (UBI) of Rs 1,394 crore.
While the policy rate decision remained a non-event as expected, with repo rate being kept unchanged at six percent, many questions still remain unanswered in the wake of rising concerns on the governance of both private and public sector banks.
In a recent address at a Gujarat University, Patel had lamented the lack of regulatory powers to take action against erring public sector banks.
In his speech, available on RBI's website, Patel had pitched for making bank regulation ownership-neutral, saying the regulator had “very limited authority” over state-run banks since it did not have the power to replace the boards of these banks or force a merger.
The governor had argued that the RBI could not even revoke the licence of a public sector bank for any activity undertaken, which was not the case when it came to private sector banks.
Elaborating Patel's point at the post-policy press conference, Deputy Governor NS Vishwanathan said: "This requires amendment to the BR (Banking Regulations) Act. The Governor has said the non-neutrality of RBI's powers comes from the provisions of the BR Act. That needs to be changed. The Governor has made the bank's position on this very clear."
Concluding his comments on the question, Patel said, “Therefore that has got nothing to do with our supervisory and regulatory action on any bank concerned.”
Investigations in the ICICI bank-Videocon case by various government agencies are currently underway even as the RBI's audit and supervision processes are being reviewed.
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