RBI Governor called by parliamentary panel on May 17

New Delhi: A parliamentary panel has called RBI Governor Urjit Patel on May 17 to answer queries on banking frauds and the powers that the central bank needs for better regulation of public sector banks (PSBs).

Sources said the decision was taken at a meeting of the Standing Committee on Finance, headed by Congress' M. Veerappa Moily.

"The Reserve Bank of India (RBI) Governor has been invited to attend the meeting on May 17," a source said.

Last month, Patel said the RBI's regulatory powers over PSBs were weaker than those over the private sector banks.

His remarks came in the wake of bank frauds including that of over Rs 13,500 crore at the Punjab National Bank (PNB).

According to the sources, the parliamentary panel would ask the RBI Governor questions about the frauds and better regulation.

The panel members also made several queries about the banking sector to Financial Services Secretary Rajiv Kumar.

Sources said some members also referred to reports of cash crunch in different parts of the country.

Finance Ministry officials answered some queries and sought three weeks to file replies to the others.

Sources said Insolvency and Bankruptcy Board of India Chairman M.S. Sahoo was also present.

The committee discussed banking frauds in both public and private sector banks. The PNB fraud was discussed with special reference to fugitive jeweller Nirav Modi.

Sources said BJP member Nishikant Dubey said that RBI had failed to discharge its role in preventing bank frauds and has sought changes in the Reserve Bank of India Act 1934 to fix responsibility in such cases.

Sources said some opposition members asked if middle-level officials were the only ones responsible for the PNB fraud and if it was a systemic failure. They said in the frauds surfacing in the banking sector, there were mistakes which were being repeated.

A member asked about the pace of corrective measures implemented in the wake of the frauds and what more needs to be done.

The panel members also raised queries about the controversy over conflict of interest in the Rs 3,250 crore loan given by the ICICI Bank to the Videocon Group in 2012. The controlling shareholder of Videocon Group co-founded a separate company with the spouse of ICICI's CEO Chanda Kochhar. A significant portion of the loan has since become non-performing.

Former Prime Minister Manmohan Singh was among the panel members present.

Another source said the panel discussed the situation in the banking sector and the way ahead with questions about the non-performing assets, Insolvency and Bankruptcy Code and auditing standards.

"It was more of a questioning meeting," the source said.