Post #PNBScam, ASSOCHAM asks govt to reduce its stake to less than 50 percent in banks

New Delhi, February 20: A week after the Rs 11,378.68 Crores PNB scam was reported, ASSOCHAM has said that the government should reduce its stake to less than 50 percent in the banks which should then be allowed to work on the lines of private sector lenders with a full sense of accountability to their shareholders protecting interest of depositors.

 

Notably, the biggest fraudulent case hit Mumbai on Wednesday last week where Punjab National Bank reported that it has detected fraudulent and unauthorized transactions in one of its branches in Mumbai. The cumulative fraud amounts to US $1,771.69 billion i.e. Rs 11,378.68 Crores.

Taking a note on this, ASSOCHAM has said, “The Punjab National Bank's fraudulent transactions worth Rs 11,300 crore should act as a strong trigger for the government for reducing its stake to less than 50 percent in the banks which should then be allowed to work on the lines of private sector lenders with a full sense of accountability to their shareholders protecting interest of depositors.”

The ASSOCHAM in a statement said, "The PSU banks, ironically, are slipping from one crisis to the other and there is a limit the government can keep bailing them out at the cost of taxpayers' money, even if it is the principal shareholder in these lenders. The top banking positions are treated as extension of a government job and the senior most managements spend bulk of their quality time, receiving and implementing directions from the bureaucrats even for innocuous issues”

“In the process, the core banking functions, including all important risk mitigation and management, take a back seat. The problem has become more grave with the banking adopting to new technologies which can prove both boon and bane, depending on how effectively they are implemented,” the statement added.

Importantly, once the government equity in the banks is reduced below 50 percent, there would be much more autonomy along with accountability and responsibility of the senior management. The boards should then be truly taking the policy decisions while the CEOs would run the banks with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions.

BACKGROUND:

Soon after PNB scam was reported, probe agencies including CBI, ED taking a stringent action registered FIR against billionaire jeweler Nirav Modi and others and raided their properties. Nirav Modi and his brother Nishal Modi left the country on 1st of January this year. Nirav Modi's wife, an American citizen, left India on 6 January while Mehul Choksi left the country on 4 January. CBI received a complaint from PNB on 29th Jan 2018and registered the case on 31st January.