PNB scam: IBC, bank recapitalisation efforts not enough, governance reforms for PSBs required, says IMF

The International Monetary Fund (IMF) has said banking reforms like insolvency code and recapitalisation will be ineffective unless governance standards are improved.

"Reforms like the IBC Code, bank recapitalisation have taken place. However, for a lasting impact, these efforts are not enough and should be accompanied by governance reforms particularly for public sector banks," the multilateral body's deputy managing director Tao Zhang said at an event at the NSE here this evening.

There is a need to look at the "deeper issue" of governance at the banks, he told reporters later.

Without naming the Punjab National Bank, he said the scam has "revealed the necessities and urgencies to improve the internal controls", which is crucial not only for improving banks but also "financial stability"

Banks should continue working on improving their balance sheets on a priority basis, he said, stressing that the asset quality situation of the domestic banks has deteriorated compared to their peers elsewhere.

Representational image. AFP

Representational image. AFP

He said the financial regulators in India should focus on monitoring and regulating services instead of only institutions.

The Rs 12,700-crore PNB scam, allegedly perpetrated by diamond trader Nirav Modi and his uncle Mehul Choksi in collusion with a few officials of a branch of the state-run bank came to light last month, wherein the duo is alleged to have used a key loophole on the international trade finance front (SWIFT) to defraud the bank.

The duo and thier officials allegedly got letters of undertaking from the Brady House branch of PNB without having the required securities and also proper trades records in place for many years.

The Fund official also spoke about financial technology firms, saying capital invested in the over 1,500 firms in the country is expected to go up by 1.7 times by the turn of 2020.

India should focus on rapidly developing the sector so that efficiencies get enhanced but also safeguard against risks and also fight misconduct, he added.

Updated Date: Mar 13, 2018 07:51 AM

Also Watch

Watch: The true stories from Dharavi that inspired Rajinikanth's Kaala
  • Thursday, March 8, 2018 Watch: Cyrus Khan talks about Parkour, jumping across walls and why he hates sitting
  • Thursday, May 31, 2018 Unwind: India's basketball sensation Amjyot Singh has his eyes set on becoming an NBA regular
  • Monday, May 28, 2018 First Day First Showsha — Review of Solo: A Star Wars Story in 10 questions
  • Saturday, May 19, 2018 Social Media Star: Rajkummar Rao and Bhuvan Bam open up about selfie culture, online trolls

Also See