Some of the recent issues at various banks, be it the accounting lapses at IndusInd Bank or the troubles at Mumbai-based New India Co-operative Bank, are only episodes and not complete failures, Reserve Bank of India Governor Sanjay Malhotra has said, reiterating that the banking system in the country remained safe and strong.
In March this year, private sector lender IndusInd Bank had warned it had found discrepancies during an internal process review related to its derivatives portfolio and that this would hit its net worth, sending shares down in a tailspin. An independent review was undertaken by the bank to validate the internal findings in that case.
Earlier in February, the Reserve Bank imposed restrictions on the New India Co-operative Bank and a case was registered by the Mumbai police against the bank's former general manager for allegedly siphoning off ₹122 crore.
"At a system level, whether it's the co-operative banks, NBFCs or scheduled commercial banks, we are very safe, secure and robust; the system is resilient," said Malhotra.
Speaking to reporters following the monetary policy committee meeting on Wednesday, Malhotra said there was a need to ensure such episodes happened less frequently.
"Let's keep in mind it's a very large system, there are a large number of players. There about 10,000 NBFCs, there are about 1,500 co-operative banks... In the last 8-9 years, some 70 cooperative banks out of 1,500, so it's very small. These things will happen. Our effort is to minimise the impact. We have to ensure through various means that these events happen less in frequency and for that we have various tools, regulations, supervision, banks have multiple layers... We have to work together and continuously try to improve the systems," he stressed.
Malhotra added that the central bank had systems to detect non-compliance as early as possible and take preemptive as well as corrective action wherever required.
Deputy Governor Swaminathan Janakiraman further stressed that the aim was to ensure the customers remain protected as much as possible even if "accidents play out."
"If there were any lapses, they will be dealt with appropriately," he said without pointing to any particular entity.
On a separate question on rising digital frauds, the deputy governor stated that it had been a major concern and that they have been working to ensure the fraud and proactive risk management systems operational at the banks are improvised so that frauds can be prevented.
"What we have to also bear in mind is that such money moves very fast and doesn't remain in the control of the regulated entities often times. But, where ever possible, they are being impounded and refunded. The success rate depends on how quickly the complaint is lodged and how quickly it is acted upon," he said.
He further added that like the golden hour is stressed in the medical system, it is something that should be adopted in digital frauds, too.
