Finance Minister Arun Jaitley on Saturday blamed “inadequate supervision” by auditors and regulators as well as “indifference” and/or ignorance of top management for the banking frauds, including the Letters of Undertaking scam at the state-owned Punjab National Bank. While hinting at a tightening of laws, he cited a lack of political consensus and ruled out privatisation of public sector banks as a response to the scams.
Speaking at an event organised by The Economic Times here, Mr. Jaitley, without naming any bank or those involved in the fraud, said it was “worrisome” that red flags were not raised and that “top managements were indifferent to what was going on or were unaware of what was going on.”
Casual job
Also of concern was that the “multiple layers of auditing system chose to either look the other way or do a casual job,” the Minister said. “You had inadequate supervision... who did what, we will eventually find out in the course of investigation.”
“Regulators have a very important function... [of] deciding the rules of the game. Regulators should have a third eye perpetually open. But unfortunately in the Indian system, we politicians are accountable, the regulators are not.” The law would be tightened further, if necessary, to find out where the fraudsters were and what was the action that the law permitted against such delinquent persons.
Referring to ethical practices, he said it was a significant problem in India. “Cases of wilful defaults are something which is much more than the business failure itself,” he said. Privatisation of PSBs involved a large political consensus. “That also involves amending the law [Banking Regulation Act]... Indian political opinion may not find favour with this idea. It’s a challenging decision.”
