The Bombay Stock Exchange (BSE) CEO, Ashish Chauhan, is not worried about the country’s banking sector despite the recent scams involving Punjab National Bank (PNB) and others. He does not see a crisis brewing in the sector, and whatever that is doing the rounds is nothing but fear-phobia. In a related development, the Supreme Court disclosed that it would take a call on the maintainability of public interest litigation (PIL) for a court-monitored inquiry into the PNB fraud.
Three Days of Interest
Chauhan’s contention is that the fraud amount in respect of the Nirav Modi case was just equal to that of three days of interest of India’s “solid” banking sector. He believes that the banking sector is not only strong but regulated one in the country. However, he said that the scam should not have happened if enough banking reforms were initiated after the Harshad Mehta scam of 1992.
Explaining his rationale, the BSE CEO stated “So, on Rs one crore core, how much interest you get in one year at 12 percent? Rs 12 lakh crore. In one month, how much you would get? Rs one lakh crore. In three days, how much you would get? Rs 10,000 crore. What is the size of the Punjab National Bank’s this particular scam? It’s three days interest of the Indian banking system, which will take care of this (scam).”
It was alleged that some bank officials and Nirav Modi, a billionaire diamantaire, and his associates were engaged in a systematic looting of money to the tune of Rs.13,000 crore in PNB. As a result, the second biggest state-managed bank had to suffer the public and shareholders anger leading to a significant drop in share price. Following the unearthing of fraud, non-bailable warrants were issued by a special CBI court against the perpetrators of the biggest scam.
While participating in Pioneering Innovation theme of a conference, Chauhan felt that the banking sector should have been reformed in 1992 itself. However, he believes that the nation has woken to the realities now and pointed out measures taken by the government. He listed out three good factors. While the first one related to demonetization, the other one was in respect of the GST. The third one related to the bankruptcy code.
Pointing out that the Indian banking system size of about Rs.one crore, he said that banks were earning at least eight percent of profit by lending money that they get from depositors. He disclosed that people are paying interest of about 12 percent a year and depositors are paid only four percent leaving the rest as profit, according to ET.
SC To Take a Call
In a related development, attorney general, K K Venugopal, has pleaded before the Supreme Court to dismiss the PIL that sought court-monitored probe into the PNB scam. The government pleader pointed out that Central Bureau of Investigation, the Income Tax department, Enforcement Directorate and the Serious Fund Investigation Office have already been engaged in probing the scam. Therefore, he does not see any room for court-monitored inquiry.