The RBI has become like a "Caretaker" of the Morgue in some ways. For time immemorial, after all the frauds have been committed by top bank officials and after the owner of the bank has accepted that the fraud has been committed by him for last several years, the RBI steps in to do the last rights. The last rights means appointing a set of its confidents as new Board Members to ensure that the bank is dissolved or merged with some other stronger entity, mostly by force.
The Punjab & Maharashtra Cooperative Bank, Managing Director has today confessed that he has been committing the fraud of not disclosing NPAs (today it is 6500 crore exposure to one single entity - HDIL out of its total portfolio of 8800 crore) over the last 7 to 8 years to its Board, Auditors and RBI. The total exposure is 73% of its total assets --- so much for RBI's Supervision and adherence to Exposure Norms. That's a total failure by Board Members, Concurrent Auditors, Statutory Auditors, RBI Inspectors
Ultimately, it all boils down to the capacity of the Supervisory staff of RBI to identify such frauds. Are they being professionally trained to do such forensic audit or are they totally dependent on the Statutory Auditor's Report who are ever compliant to the bank's demands lest they may not be given the job next time!!
My take is, the Home Ministry is professional enough to keep pace or move one step ahead of the terrorists and the Maoists in defeating their fissiparous tendencies. However, the Ministry of Finance and the Reserve Bank of India do not even have a clue as to what types of frauds are possible in the messy world of Deposits and Credits in our financial systems.
Another meaninglessness in the circular of RBI in the case of PMC Bank imposting restrictions ban on withdrawals upto Rs.1000/- (which was later on increased to Rs.10000/- per day). RBI has, in the interest of the depositors, has put the restriction on withdrawals. However, in the same circular it has stated that salary of all staff has to be paid on due dates without fail. Adding fuel to fire, it also stated that all Gratuity and superannuation benefits has to be paid to all those staff who retire even when there is a restriction on withdrawal by depositors. What is the message that is conveyed? While the bank staff who were party to the fraud or unable to stop this fraud will enjoy all the benefits, the poor depositors, with whose money the bank is being run, are imposed restrictions on withdrawal!!! Is this even tenable during this age!!!
Time to Wake Up MoF & RBI!!
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