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India Inc condemns $1.8 billion fraud in Punjab National Bank

Author: IANS/Friday, February 16, 2018/Categories: Government

India Inc condemns $1.8 billion fraud in Punjab National Bank

New Delhi, Feb 16 - Two days after the $1.8 billion fraud in Punjab National Bank (PNB) was disclosed, industry chambers on February 16 condemned the incident criticising the functioning of public sector banks.

"Alleged fraudulent transactions worth Rs 11,300 crore from a single branch of the Punjab National Bank with the connivance of the junior official(s) shows how vulnerable the Indian banks, especially those in the public sector, have become, with a dangerous potential contagion in the country's financial system," a statement by Assocham said.

The Federation of Indian Chambers of Commerce and Industry (FICCI) condemned the illegal and unethical business practices adopted in the recent PSU Bank fraud case and commends the speed with which the government agencies including Enforcement Directorate, Central Bureau of Investigation and other agencies have moved to take the investigation forward.

Fraudsters should be expeditiously punished in accordance with the law, the chamber said.

FICCI also recommended that in order to strengthen systemic and others risk management systems within the banking ecosystem, a thorough root cause analysis be done to plug the gaps and ensure there is no repeat of any wrongdoing that impacts the rightful functioning of any banking institution while discharging its duties to its customers and stakeholders. 

"FICCI defends the freedom of business enterprise but does not support illegal and unethical business practices," said Rashesh Shah, President, FICCI.

"The fact that an officer of the level of a deputy manager, as is being reported in the media, could single handed wreck not only the country's second largest PSU bank but also several other lenders shows how the risk management system is lacking in these entities and how a chain of command system was not there or was not followed," said D S Rawat, Secretary General, ASSOCHAM.

He said with growing size of the Indian economy, the size of the banks and other financial institutions have also become large enough to leave a huge contagion, in case things go wrong. 

"The PNB incident should open our eyes to the malaise and a huge gap that exists in building a foolproof risk detection and management. Ironically, even the regulator, which is the RBI, could not detect the problem well in time. After all, the RBI inspection is considered a routine affair in the bank branches," Rawat added.

He said "the scandal" has broken at a worse time for the banks which are battling a humongous problem of the non-performing assets.

"The PNB incident should not be allowed to shake confidence of depositors in the banking system. Such incidents would also make the public more apprehensive about the impending FRDI Bill," he said.

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