Post PNB Fraud, a lot of fuss for privatizing PSB’s by many industrialists, CEO’s of various companies, bureaucrats; it times for RBI governor to veil pitch for Public Sector Bank’s privatization. He said that
He also supported the withdrawal of legal immunity from RBI regulations that PSBs enjoy, siting corporate governance. RBI governor has clearly pointed accusation at PNB and said that the fraud was essentially an operational failure with the bank disobeying instructions of Reserve Bank of India.
He also sited that the powers of RBI over PSBs is limited under the Banking Regulation Act. He insisted that the fraud is one of the biggest issues bothering RBI, with 86% of such cases taking place in the loans and advances portfolio of banks. The majority churn of these frauds consist of liberal cash-flow projections, non-monitoring of cash flows, gold-plating (inflating value) of projects and diversion of funds.