The credibility of PSU banks…

Back in 1992 when the Harshad Mehta scam broke out in the stock markets, it emerged that banks were at the center of the scam. The broker was exploiting loopholes in Banker’s Receipts (BR) and using the treasury funds of these, banks to create a bull market in equities. It led to the formation of the Narasimham Committee which set in motion path-breaking reforms in the banking space. The question is whether Indian banking is back at the cusp of a major shift?


In the aftermath of the Nirav Modi fiasco and the audacity with which Rotomac has defaulted, it appears that Indian banking is again facing a crisis of confidence. It almost appears like any rich promoter can borrow money and skip town and banks will not be able to do anything about it. That is not good news for the image of PSU banks. Look at the compliance lapses! The global SWIFT system at PNB was totally manipulated by a handful of people and that was not traced by repeated audits over a long period of 7 years. Potomac case is even worse. How did the banks not raise red flags when Vikram Kothari was consistently defaulting on loans? And what were the external auditors and the internal auditors doing? How did the bank inspections ignore all these facts? The bottom-line is that it is compliance failure at multiple levels. On top of the $200 billion of stressed assets, this has created a crisis of confidence!


What needs to be done?


Broadly, the government needs to focus on 6 areas to restore the confidence of the people in the PSU banking system

• Tweet
• Share
• Share
• Share
• Share

About Admin MC3

This is dummy text. It is not meant to be read. Accordingly, it is difficult to figure out when to end it. But then, this is dummy text. It is not meant to be read. Period.

Related Post