PNB fraud turns up heat on India's banking reforms
PrintListen to this Article
The PNB fraud could spread, too. It provides a fresh impetus to consider governance improvements across the industry.
In the first instance, the PNB fraud disclosed on Wednesday suggests serious problems with PNB’s risk controls. Though details are scant for now, it’s especially galling considering the episode comes fresh on the heels of the pledge of an injection of funds by the government. The headline figure involved represents more than twice what New Delhi promised to the bank as part of a wider Rs2.11 trillion bank recapitalisation plan to prop up the country’s banks after an era of reckless lending.
The scam may have spilled over to rival lenders, too. PNB says “other banks appear to have advanced money to these customers abroad”. In the meantime, it is also mixed up in further allegations. Federal agents have initiated an investigation into billionaire jeweller Nirav Modi, one of the country’s richest men, over accusations that he and others defrauded PNB of Rs11,400 crore.
Given the circumstances, it’s hard to believe the bank could raise additional equity from the capital markets. Depending on the outcome of the fraudulent transactions and the money involved, it puts the burden squarely on India’s taxpayers.
The only good that could come out of the affair would be some fresh consideration to implementing better practices. State lenders oversee about two-thirds of India’s bank assets. Politicians interfere with appointments, meaning institutions have little control over who sits on their boards. This would be one area worth changing.
Chieftains also typically stay in the job for just three years, hardly long enough to preside over genuine change. They’re paid a fraction of their private-sector counterparts. The lower ranks have little financial incentive to enhance performance. Authorities have talked about rewarding employees with stock options, but there has been no action so far. Alongside its recapitalisation, New Delhi promised governance upgrades. These can’t come soon enough. #casansaar (Source - Reuters, LiveMint)
Category : Banking | Comments : 0 | Hits : 1603
The Financial Intelligence Unit-India (FIU-IND), in furtherance of the powers conferred upon the Director FIU-IND under Section 13(2)(d) of the Prevention of Money Laundering Act (PMLA), 2002, has imposed a monetary penalty of Rs. 5,49,00,000 (rupees five crore forty nine lakh) on Paytm Payments Bank Ltd with reference to the violations of its obligations under the PMLA read with the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules) issued thereunder and applicable ...
The government on Monday informed the Lok Sabha that all Scheduled Commercial Banks have written off nearly Rs 10.6 lakh crore in the last 5 years, out of which nearly 50 per cent belong to large industrial houses. It also said that nearly 2300 borrowers, each having a loan amount of Rs 5 crore or more, wilfully defaulted around Rs 2 lakh crore. As per the Reserve Bank of India (RBI) guidelines and policy approved by bank boards, NPAs, including those in respect of which full provisioning has...
The government has cleared the extension of tenure of managing directors of two public sector lenders -- Bank of Maharashtra (BoM) and Central Bank of India. According to sources, Appointments Committee of the Cabinet (ACC) has approved extension of term of office of A S Rajeev, MD and CEO of BoM, for six months till his superannuation. Besides, sources said, ACC has extended the term of M V Rao, MD and CEO of Central Bank of India, till July 31, 2025.
The Central Bureau of Investigation (CBI) has started probe into the multi-crore banking fraud in which a former Punjab National Bank (PNB) employee, M.P. Rijil, allegedly swindled ?21 crore from multiple bank accounts, including the eight accounts maintained by the Kozhikode Corporation. The case is being investigated by the Kochi unit of the CBI in compliance with an earlier order issued by the Kerala High Court. The case, which was initially investigated by the Kozhikode Town poli...
The Enforcement Directorate (ED) on Saturday arrested two promoters of a Chandigarh-based pharma company, who are also the co-founders of the Sonepat-based Ashoka University, and a chartered accountant in a money-laundering probe linked to an alleged bank fraud. Official sources said the central agency also continued with its searches against the group for the second day, including at the Ashoka University's corporate and registered offices in Delhi and campus in Sonepat. Parabolic Dru...
Comments