Urjit Patel quizzed by parliamentary panel, says will strengthen banking system

New Delhi: RBI (Reserve Bank of India) Governor Urjit Patel was grilled and bombarded with tough questions on the Nirav Modi scam when he faced a group of parliamentarians today to brief them on the banking sector crises. 

The RBI governor was appearing before the parliament's standing committee on finance headed by Congress's Veerappa Moily. The standing committee includes leaders from several parties besides former Prime Minister Manmohan Singh.

The RBI Governor faced questions from a parliamentary panel on bad loans, bank frauds, cash crunch and other issues even as he assured the members that steps were being taken to strengthen the system, sources to news agency PTI said.

According to sources to NDTV, the lawmakers grilled the regulator on the scale of the PNB (Punjab National Bank) scam that took place despite the RBI's checks and balances and raised questions on the quality of monitoring.

On the panel's agenda is to question the RBI Governor on the impact of demonetisation and bad loans, specifically the Rs 13,000 crore-PNB fraud.

Celebrity jeweller Nirav Modi fled India in January nearly a fortnight before PNB, India's second-largest public sector bank, detected the fraud. Nirav Modi allegedly managed thousands of crores in loans he never paid back, using fake guarantees supplied by PNB officials at a branch on Mumbai.

How were fake LoUs (Letters of Undertaking) going around for several years and why did the RBI fail to notice, Urjit Patel was asked by the parliament's standing committee on Finance. "Why didn't RBI check the credentials? RBI has powers to check and investigate every branch anywhere. Why didn't it use the power?" the RBI chief was asked by a senior parliamentarian, reports NDTV.

The billionaire, who has refused to return to India despite multiple summons by the CBI, is believed to be trying for political asylum in the UK.

Read: Nirav Modi flees to UK, claims asylum over 'political persecution': report

Nirav Modi and his relative Mehul Choksi, also accused of fraud, have refused to join the investigations claiming business engagements and health issues.

Mehul Choksi is reported to be in New York. 

The CBI on Monday asked the Interpol to issue a Red Corner Notice against Nirav Modi and Mehul Choksi, which means member countries can arrest and deport or extradite them.

Also Read: CBI requests Interpol to issue Red Corner Notice against Nirav Modi

Meanwhile, sources of PTI who were present at the meeting of the Parliamentary Standing Committee on Finance said the RBI Governor expressed confidence of tiding over the crisis regarding non-performing assets (NPAs). 

Some members of the committee sought to know about the reasons for recent instances of ATMs running out of cash and why enough steps were not taken to tackle banking frauds. Patel told the panel that steps were being taken to strengthen the banking system. "We are confident that we will be able to tide over the crisis," a source to PTI quoted the Governor as saying with respect to the NPA situation. 

Striking an optimistic note, RBI Governor Urjit Patel informed the committee that after implementation of the Insolvency and Bankruptcy Code (IBC), the situation on the NPA front has been improving.

The next meeting of the standing committee on finance will be held on June 19. A representative of RBI will also be present in the meeting.

(With inputs from agencies)