The Telegraph
Wednesday , August 6 , 2014
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Lens on Syndicate Bank books

Mumbai, Aug. 5: The Reserve Bank of India today said it had initiated an inspection of the account books of Syndicate Bank, whose chairman and managing director S.K. Jain was recently arrested by the CBI.

RBI governor Raghuram Rajan did not elaborate further on the probe but said there was a need to overcome some deficiencies of PSU banks.

“We need to again look at the governance of the public sector bank and understand the deficiency there and try and improve it,” Rajan said.

He, however, added that the developments at Syndicate Bank did not mean this was the same for the entire domestic banking system as there were many highly qualified and reputable people working in public sector banks.

“There is an inspection underway of Syndicate Bank but I think one has to be very careful about extrapolating this issue to the entire banking system without thinking further through. It (Syndicate Bank episode) does raise a troubling issue,” the RBI governor said.

The CBI arrested Jain on August 2 for allegedly accepting a bribe of Rs 50 lakh to enhance the credit limit of some companies.

Rajan said it was important for an enforcement agency to ensure that full investigation was done and the culprits were brought to book. However a balance needs to be maintained so that it does not become a witch-hunt, which stalls the entire credit process.

Incidentally, a committee headed by P.J. Nayak had recently observed that there were governance difficulties in public sector banks and they arose from several externally imposed constraints.

These included dual regulation by the finance ministry and the RBI; significant and widening compensation differences with private banks, leading to the erosion of specialist skills; and external vigilance enforcement though the Central Vigilance Commission and the CBI.

Meanwhile, Syndicate Bank assured all stakeholders that its fundamentals continued to be robust.

“The bank is functioning normally,” it said.

“The bank, further, reiterates its commitment to continue satisfactory customer services and assures that all customers can get regular banking services as usual,” it added.