House panel grills 11 PSBs on NPAs, frauds

The controversial arrest of Bank of Mahrashtra CEO Ravindra Marathe found its echo at a meeting of a Parliamentary panel, which posed tough questions to representatives of 11 public sector banks appearing before it on rising NPAs in public sector banks and cases of bank frauds.

Chairman of the Parliamentary Standing Committee of Finance, senior Congress leader M Veerappa Moily dubbed the arrest as “against the law”, saying the investigating agencies should have taken permission from the appropriate authority. Moily also expressed surprise as to why the government had not spoken on this “wrong decision”.

The Committee was told by the PSBs, which are under RBI's watchlist for mounting bad loans, that they are toning up their mechanism to control bank frauds.

The panel had called the PSBs on Tuesday after RBI Governor Urjit Patel told it on June 12 that the apex bank cannot monitor the minute functioning of such a large number of PSBs and it is incumbent.

The banks were asked on Tuesday as to what kind of internal mechanism they have that incidents of bank frauds like the one involving Nirav Modia and Mehul Choksi are happening. The panel members also asked them why the NPAs in public sector banks are alarmingly high than in private sector banks.

Sources said that the Committee has now decided to call before it officials from the Department of Financial Services.

Veerappa Moily is keen to submit the report before Parliament in the Monsoon Session beginning on July 18.

Regarding NPAs, the PSBs said that most of the NPAs are in power and infrastructure sectors, but things are “looking up” after the Insolvency and Bankruptcy Code and the NCLT coming into force.

The RBI Governor had already submitted before the panel a 60-page written response. BJD member in the panel, B Mahtab, asked the banks whether the RBI Prompt Corrective Action (PCA) is helping the public sector banks.

The banks told the panel that they would emerge out of the PCA framework by 2020, when they were asked repeatedly about "stagnation in lending operations" of state-owned banks.

The banks whose representatives appeared before the panel on Tuesday are IDBI bank, UCO Bank, Central Bank of India, Bank of India, Indian Overseas Bank, Dena Bank, Oriental Bank of Commerce, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank.