RBI never wastes a good crisis, says deputy governor Swaminathan J
Mumbai: The Reserve Bank of India (RBI) will deal appropriately with those accountable if it finds there were lapses leading to what it calls “episodes” in the financial services sector, deputy governor Swaminathan J. said on Wednesday.
His statement had the disclaimer that he was not referring to any particular episode. But broadly, it came in response to a series of questions on recent crises in the financial system, including the derivative debacle at private lender IndusInd Bank and the alleged fraud at New India Co-operative Bank.
“We never waste a good crisis and there will be learnings,” said Swaminathan, who heads the regulator’s department of supervision. “It is our intention to minimize and ensure that the customers remain protected even if accidents play out.”
On 10 March, IndusInd Bank Ltd flagged discrepancies worth about ₹1,530 crore in its derivatives account balance, which managing director and chief executive officer Sumant Kathpalia said could have led the banking regulator to allow him only a one-year extension instead of three. Meanwhile, on 13 February, RBI placed New India Co-operative Bank under restrictions.
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“In each of these crises we have taken adequate steps to ensure that the customer inconvenience is minimized and customer money is protected to the extent possible,” said Swaminathan.
Swaminathan said that whenever such failures happen, while RBI takes risk mitigants to protect the customers, it also directs the boards to ensure that proper forensic and accountability studies are held. Then whoever is accountable–whether internal or external or service providers–all of them will get covered in that and actions will play out, he added.
“It will take its due course in terms of if there were any lapses and they will be dealt with appropriately. I don’t want to say it in specific reference to any particular episode but in every episode, apart from repair that gets carried out, there will also be an accountability which will follow,” said Swaminathan.
Governor Sanjay Malhotra said he does not want to talk about individual entities. However, at the broader system level, whether it is the cooperative banks, non-banking financial companies (NBFCs) or the scheduled commercial banks, things are very safe, secure, robust and the system is resilient, he added.
“The other thing is, let us keep in mind that it is a very very large system. There are a large number of players: almost 10,000 NBFCs (non-banking financial companies), about 1,500 cooperative banks,” said Malhotra.
He said “these things” will happen and that the RBI’s effort is to minimize them–so far their numbers have been quite low.
“These are episodes, they’re not even failures. These episodes will happen and we have to ensure through various means that these events, incidents happen less frequently,” said Malhotra.
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