Limit collateral damage from bank frauds: Assocham

We can learn a lot from the US experience of handling the global financial crisis of 2007-08, said the business chamber

GN Bureau | March 12, 2018


#Punjab National Bank   #Assocham   #PNB fraud   #Banking   #Nirav Modi  

All out efforts must be made by banks, regulators, government and India Inc to limit the collateral damage from the fraud in PNB, said Assocham.

It cautioned over-reaction by the banks and the investigative agencies since it would hurt essential credit disbursement to the trade and industry and hamper the growth expectations.

“Following unearthing of the alleged scams and the media headlines, the banks are becoming cautious while there is a perceived public pressure on the regulators to act tough.  Given the scale of the problem, the level of noise may be justified, but it could cause a huge loss of confidence. So, it is time to show immense restraint and use the adverse situation as an opportunity to fix the systemic issues," said Assocham secretary general D S Rawat.

The chamber said: “We can learn a lot from the US experience of handling the global financial crisis of 2007-08. The US authorities worked at the root of their banking system and have put in place some robust risk mitigation and prudent system.”

In the present Indian situation while the debate on reducing government stake to below 50 percent should be encouraged, some immediate steps should be taken to  do the capacity building in the PSU banks, enabling them to prevent, detect and act on frauds.

Given the technology disruption taking place and India's ambitions to enhance digital footprints, it is all the more important to put in place robust systems which are well beyond compromise, the Assocham said in a press statement.

It said given the nature of fast changes, the PSU banks with full support from the government and the RBI, need to develop expertise in specific business verticals. “Lending to infrastructure projects is not the same as lending for retail trade, transportation or operating in the bond market. A new approach is needed for technological and human resource upgrades," said Rawat.
 

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