The bribery episode at Syndicate Bank throws up ‘governance’ issues at some public sector banks, says Raghuram Rajan
Syndicate Bank chairman and managing director S.K. Jain was arrested by the CBI on Saturday for accepting bribes to extend credit facilities to companies. Photo: Bloomberg
Live mint 4 Aug 2014
The Reserve Bank of India (RBI) has initiated an inspection atSyndicate Bank Ltd following allegations that the chairman and managing director of the bank had taken bribes to sanction loans.
The bribery episode at Syndicate Bank throws up “governance” issues at some public sector banks, RBI governor Raghuram Rajan said on Tuesday. He, however, cautioned against “extrapolating” the incident to the whole public sector banking space.
“Inspection of Syndicate Bank is going on but one has to be careful about extrapolating it to other banks. It is important to ensure that a full investigation is done and the investigation agencies are doing it but a balance has to be maintained. While the culprits must be brought to book it does not have to be a witch hunt which impacts credit appraisals,” Rajan said in a post credit policy interaction with the media.
Syndicate Bank chairman and managing director (CMD) S.K. Jain was arrested by the Central Bureau of Investigation (CBI) on Saturday for accepting bribes to extend credit facilities to companies.
Responding to a question on whether the RBI needs to keep a stronger check on pricing of loans in order to ensure that discretionary powers of bankers are kept in check, Rajan said that, to some extent, bankers have to be allowed to make decisions based on judgement.
“We cannot take bankers out of the equation. Banking is such that bankers and borrowers have a certain chemistry. that is what relationship banking is all about. It helps bankers to understand whom to give how much loans and whom not to,” Rajan said.
“If we take bankers out of the equation we might as well have machines in their place like credit scores. It is hard for us to do. Banking is also about judgment. We have a lot of highly qualified and highly credible people working in public sector banks, we have to give them the space to work because they are working for the nation,” Rajan added.
On Monday, Jain who is in CBI custody, was suspended from the bank by the government. The bank’s stock had fallen 9% on Monday.
On Tuesday, the bank assured all its stakeholders that the fundamentals of the bank continue to be robust and bank is functioning normally.
At 1:53pm, Syndicate Bank was trading at Rs.134.40 on BSE, down 0.04% from previous close while India’s benchmark Sensex Index down 0.50% to 25,609.62 points.
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