PNB fraud fallout: India Inc calls for privatisation of PSBs

Tribune News Service

New Delhi, February 23

Joining the industry chorus, CII today stressed that the government should consider lowering its stake in public sector banks (PSBs) and increasing the equity spread through wider private participation.

Commenting on the recent PNB fraud case, Chandrajit Banerjee, Director General, CII, said, “The current episode of financial fraud shows gaps in supervision and monitoring systems at the bank level which have the potential to become disruptive for the industry and the financial sector both”.

CII condemned such malfeasance by unethical enterprises, which are allegedly perpetrated in consort with certain corrupt employees of the affected banks. It further suggested focus on enhancing supervision and monitoring at all levels, infusing professionalism in bank’s management, and dilution of government stake in PSBs to bring them down to 52% in the first phase and then further reduce to 33% and usage of smart technologies such as block chain, big data analytics and artificial intelligence in banks.

It said the government should consider lowering its stake in PSBs and increasing the equity spread through wider private participation. This should be accompanied by consolidation of PSBs to result in fewer but stronger institutions of global scale. This would lead to improved governance, enhanced accountability and better professional conduct in the PSBs. It said the current episode of malfeasance calls for focus and facilitation by the regulator to improve monitoring and supervision at the bank level.

While strongly opposing privatisation of banks and blaming private sector for the creation of NPAs in the banking system, the All India Bank Employees Association (AIBEA) has written a letter to Finance Minister Arun Jaitley on the PNB fraud.

AIBEA general secretary CH Venkatachalam said in the letter that after the NDA Government came to power in May 2014, not a single appointment for the posts of employee directors on the Board of Directors of banks has been made. These employee directors have been playing the role of a watchdog, he said.

He said the scope of functioning of the Boards of Directors of the PSBs has been grossly diluted in the recent years – another effect of liberalisation era. “Powers of the Board are concentrated in the hands of few in the name of Committees. Many important aspects of control and monitoring are relegated as routine agenda,” he said.

Under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 and 1980, the scheme of management of banks includes appointment of Workman Employee Director and Officer Employee Director on the Boards of each PSB. “Right from 1970/1980, these appointments were being made. These Employee Directors have been playing the role of a watchdog”, he added.