PNB Fraud: RBI sets up panel, asks banks to strengthen SWIFT system

The Economic Times, Gayatri Nayak, Feb 20, 2018


In the wake of the Rs 11,300 crore fraud at the Punjab National Bank, the Reserve Bank of India has constituted a five member panel under former board member Y H Malegam to look into the wide divergence by banks in asset classification and provisioning and reasons for frauds and measures to prevent it and also asked them to strengthen the SWIFTBSE -0.97 % operating environment. 

“In view of large divergences observed in asset classification and provisioning in the credit portfolio of banks as well as the rising incidence of frauds in the Indian banking system, it has been decided to constitute an Expert Committee under the chairmanship of Shri Y H Malegam, a former member of the Central Board of Directors of RBI” the Reserve Bank said in a release posted on its web site.



The panel will also look into the reasons for high divergence observed in asset classification and provisioning by banks vis-à-vis the RBI’s supervisory assessment. 

Besides Malegam, other members include Bharat Doshi, member of RBI’s central board, S Raman, former chairman and managing director, Canara Bank and former whole-time member, Sebi, Nandkumar Saravade, Chief Executive Officer, Reserve Bank Information Technology Pvt Ltd (ReBIT). A K Misra, Executive Director, RBI will the Member-Secretary of the committee. 

Besides, prescribing steps needed to prevent it, factors leading to an increasing incidence of frauds in banks and the measures (including IT interventions) needed to curb and prevent it, the panel will also highlight the role and effectiveness of various types of audits conducted in banks in mitigating the incidence of such divergence and frauds. 


Among banks, State Bank of India has reported NPA divergence of Rs 23,000 crore, which is 20% higher than their declared bad loans, followed by Yes Bank at Rs 6,355 crore, which is 314% higher than their reported NPA. 


Among others, HDFC Bank has reported NPA divergence of Rs 2,051 crore, while Axis Bank declared divergence of Rs 5633 crore. 

The central bank has also reiterated its confidential instructions and mandated the banks to implement, within the stipulated deadlines, the prescribed measures for strengthening the SWIFT operating environment in banks. 




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