India to tighten up banking risk management: Arun Jaitley

Mumbai: Finance Minister, Arun Jaitley said on Thursday that the government was working to tighten up risk management in the banking sector, responding to recent scandals that have raised doubts about lending practices at state banks. Jaitley did not name any bank, but his comments followed the launch of an investigation into whether the head of state-controlled Syndicate Bank took bribes to roll over a loan to family-controlled Bhushan Steel.

"Some recent instances have been disturbing," Jaitley told a banking audience in New Delhi. "I would only hope that they are a drop in the ocean and we have all learnt the lessons from such incidents, and there will be no repetition of them."

The investigation into Syndicate Bank has raised broader concerns about weak oversight, corruption and politically directed lending at India's dominant state banks, which are weighed down by bad loans. In his maiden budget last month, Jaitley said state banks would need $40 billion in fresh capital by 2018 to meet international capital adequacy standards. Much of this cash is expected to be raised on financial markets.

The Central Bureau of Investigation has arrested the chairman of Syndicate Bank and is questioning the head of Bhushan Steel, which owes $6 billion and was this week put under tighter scrutiny by its creditors.