The Central Vigilance Commission (CVC) has urged the Prime Minister’s Office to bring private sector banks under its watch, citing the fact that they have been involved in many recent instances of malfeasance.
Vigilance officers in all State-owned public sector banks are required to report irregularities and possible wrongdoing to the CVC, India’s apex body for checking corruption in the government. Private sector banks are out of the CVC’s purview, but are subjected to statutory audits from the Reserve Bank of India (RBI).
Deviating from norms
Private banks have been rapped in recent months by the banking regulator for deviating from norms that govern the disclosure of non-performing assets (NPAs), leading to under-reporting. The processes followed for lending decisions among private lenders have also come under the scanner.
The Central Bureau of Investigation disclosed last week that it has initiated a preliminary inquiry into loans granted by the country’s largest private lender ICICI Bank to Videocon Industries as it suspects a nexus between Deepak Kochhar, husband of the bank’s CEO and managing director Chanda Kochhar, and Videocon chairman Venugopal Dhoot.
“The CVC has requested the PMO to consider empowering it to have an oversight on private banks as well, and make the legislative changes to facilitate the same,” said an official.
In February, soon after the disclosure of a ₹12,800 crore fraud at the country’s second largest public sector bank, Punjab National Bank (PNB), the CVC had summoned senior officials from the Reserve Bank of India (RBI), the Finance Ministry and the bank’s Chief Vigilance Officer to understand how the fraud perpetrated by firms owned by Nirav Modi and Mehul Choksi went undetected for so long.
“What happened at PNB is unacceptable, but one must recognise that private banks have also played a role in lending to firms associated with Mr. Modi and Mr. Choksi. Given the systemic risk such fraud poses for the economy, it is important that the CVC has a comprehensive view over corrupt practices in banks,” said an official aware of the CVC’s missive to the PM’s Office.
“The temptation to engage in fraud at the level of employee or employees is always present, in banks (or in corporations), be it in public sector or private sector,” RBI Governor Urjit Patel said on March 14, adding that investigative, vigilance and legal deterrence could be a powerful mechanism to induce discipline against such frauds. He said the central bank should have more regulatory powers over public sector banks.
