New Delhi, Feb 20: Amid apprehensions that the Rs 11,400-crore fraud at Punjab National Bank (PNB) is just the tip of iceberg, the government is learnt to have written to the Reserve Bank of India (RBI), asking some tough questions on whether there were any supervisory or regulatory lapses in the scam. The government has expressed doubts over the central bank’s “efficacy of supervision to detect and check systemic failure”, some media reports suggested. It has also sought details of the fraud from the regulator. Financial services secretary Rajeev Kumar didn’t respond to text messages on the government’s letter to the central bank. An RBI spokesperson said that he could confirm or comment on the veracity of these reports later.
Either the framework designed by the RBI to prevent and detect such frauds is inadequate or the central bank is unable to ensure its effective implementation, the government is reported to have said in the letter to the RBI. Earlier in the day, the financial services secretary said the finance ministry had written to banks to initiate effective measures to avoid a PNB-like fraud in future. Bankers say the central bank has all the necessary powers to deal with the current crisis. According to Section 35 of the Banking Regulation Act, the RBI at any time may, and on being directed so to do by the Centre, cause an inspection to be made by its officers of any bank and its books and accounts. According to Section 36, the central bank may caution or prohibit banks against entering into any particular transaction or class of transactions, and generally give advice to any banking company. It may also appoint one or more of its officers to observe the manner in which the affairs of the banking company or of its offices or branches are being conducted and make a report.