TIL Des/Business/New Delhi/ ‘In plain simple English, these practices amount to a looting of our country’s future by some in the business community, in cahoots with some lenders,’ says RBI Governor Dr Urjit R Patel.
There has been a tendency in the pronouncements post revelation of the fraud (at the Punjab National Bank) that the Reserve Bank of India supervision team should have caught it.
While that can always be said ex post with any fraud, it is simply infeasible for a banking regulator to be in every nook and corner of the banking activity to rule out frauds by ‘being there’.
If a regulator could achieve such perfect outcomes, it would effectively imply that the regulator can do anything that banks can do, and by implication, can simply perform the entire banking intermediation activity itself.
What is needed is that various mechanisms to deter frauds and other irregularities are in place and have bite so that fraud incidence is low and magnitudes contained. Indeed, frauds have happened at banks in regimes with varied levels of banking regulatory quality and in both public and private banks.
