Breaking his silence on the ₹11,500-crore fraud at Punjab National Bank (PNB), Finance Minister Arun Jaitley on Tuesday squarely laid the blame on the country’s bankers and auditors, observing that they had both abdicated their responsibilities.
“The Prime Minister himself had announced that we want you [public sector banks] to be autonomous,” Mr. Jaitley said, addressing a meeting of the Association of Development Financing Institutions in Asia and the Pacific. “None of us is going to call you up and therefore [you] take your own decisions. When authority is given to the managements, you are expected to use that authority effectively and in the right manner.
“Therefore a question for the management is, were they found lacking? And on the face of it the answer seems ‘yes’ they were,” Mr. Jaitley added. “They were also found lacking in being able to check who among them were the delinquents.”
The Finance Minister also took financial auditors to task, suggesting that the regulatory body for chartered accountants should introspect on what possible action could be taken in the wake of the fraud.
“What are our auditors doing? Both internal and external auditors have either looked the other way or failed to detect,” Mr. Jaitley said. “I am sure the profession of chartered accountants and those who control the discipline of the profession will start introspecting and see what are the legitimate actions which are to be taken.”
The Institute of Chartered Accountants of India last week said it would review the fraud to probe whether there were lapses on the part of auditors and has sought information from investigation agencies as well as from the markets regulator SEBI.
“And, of course, there is also an important challenge where the supervisory agencies have now to introspect what are the additional mechanisms they have to put in place to make sure that stray cases don’t become a pattern and it is nipped in the bud,” he added.
Cost to country
Mr. Jaitley said that these kinds of developments have a cost to the country and to the tax payers. “It has a direct cost and it has an indirect cost, which impinges upon the bank’s capacity as a lending institution, and therefore it obviously impinges upon development finance,” he said.
On perpetrators, Mr. Jaitley asserted: “With regard to lack of ethics that a faction of Indian business follows, it is incumbent on us as a state, till the last legitimate capacity of the state, to chase these people to the last possible conclusion to make sure that the country is not cheated.”