Deposits in PSU banks 100% safe and secure, says Finance Minister

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NEW DELHI — Public money in state-owned banks is 100 per cent safe and secure, Finance Minister Piyush Goyal said today against the backdrop of several cases of fraud, including the USD 2 billion scam at PNB unearthed recently.

Speaking to the media after meeting heads of public sector banks (PSBs), he also said the government is open to the question of giving more powers to the Reserve Bank for effectively regulating PSBs.

“Let me reassure everybody that public money is extremely safe in the public sector banks. Government stands behind public sector banks… Government owned banks’ deposits are 100 per cent safe and secure,” he said.

Goyal added however that he does not know “how safe it is in private sector and some of the companies which have income tax dues, which they don’t pay”.

Several cases of frauds have surfaced in the recent past at PSBs.

The most talked about fraud allegedly involves Nirav Modi, who along with associates, used fake Letters of Undertaking (LoUs) defrauding state-owned Punjab National Bank to the tune over USD 2 billion.

Various investigating agencies are probing the over USD 2 billion fraud allegedly committed by diamond jeweller Nirav Modi and his associates.

Goyal said the frauds were perpetrated by private companies and not PSBs.

In reference to recent suggestion by RBI Governor Urjit Patel that the central bank lacked powers to effectively deal with PSBs, Goyal said RBI has powers, but if additional powers are needed the government was open to the idea.

“We believe that powers are available with the Reserve Bank and that is the conversation that the government and Reserve Bank will have amongst themselves,” Goyal told the media after meeting heads of 13 PSBs here.

“If there are any more additional powers required, government is open to that,” he said.

The minister added however that he personally does not “believe there is any shortage of powers but we will have discussion with RBI and sort them out”.

Appearing before the Parliamentary Standing Committee on Finance on June 12 here, Patel had made a strong case for more powers to effectively regulate PSBs, as several of them have been hit by frauds.

The RBI has cited at least 10 areas where it has no control over PSBs. The central bank has no powers to remove chairman, director or CEO of state-owned banks and also cannot impose restriction on common directors on PSB boards, among others.

Goyal further said bankers have decided to embark on a strategy to give a push to lending to genuine corporate borrowers as well as small businesses with a view to support the uptick in the economic activity.

“One of the thoughts before the public sector banks has been that they have to once again get into the act of working to support MSMEs and genuine good companies who need working capital finances or loans on investment in fixed assets and have some difficulties in the past,” he said.

During the bankers meeting, mounting non-performing assets (NPAs) or bad loans in the banking system figured prominently. NPAs in the banking sector were about Rs 9 lakh crore at end-December 2017.

Issues related to banks, which are under RBI’s supervision (Prompt Corrective Action), too came up for discussion.

At the meeting, SBI Chairman Rajnish Kumar shared experience about consolidation carried out by his bank by merging five SBI associate banks and Bharatiya Mahila Bank last year.

“SBI shared experience about the consolidation. What are the possible pitfalls, what are the advantages and what are the things to watch for when you are undertaking such exercise.

“This is food for thought which have been given and now individual banks will use that and look for opportunities but there is unanimity that public sector banks are fragmented as of now,” said Kumar, who too was present at the media briefing.

Goyal further said that sub-committee headed by PNB Chairman Sunil Mehta on setting up an asset reconstruction or an asset management company will be shortly coming out with the report.

Besides, the report by P S Jayakumar committee will also be submitted soon, he said, these reports once submitted will be discussed among banks themselves and decide the way forward.

These committee were formed at the last meeting held earlier this month in Mumbai.

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