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Government Says PNB Fraud Points To Supervisory Failure At RBI
Rajeev Kumar, the top government bureaucrat overseeing banks, told Reuters in New Delhi the finance ministry had written to the country's banks to take effective steps to avoid a repeat of a PNB-like fraud. Kumar declined to comment if the government had written to the RBI
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India's government has said the $1.77 billion fraud at state-run Punjab National Bank was a "manifestation of supervisory failure" at the country's central bank, local media reported on Monday.
In a letter to the Reserve Bank of India (RBI), the government said the failure to detect the fraud, the biggest ever in India's banking sector, raised questions about the central bank's "efficacy of supervision to detect and check systemic failure", NewsRise and other local media reported.
"Either the framework designed by RBI to prevent and detect such frauds is inadequate or RBI is unable to ensure its effective implementation," they quoted the letter as saying.
The RBI did not immediately respond to a request for comment on Monday, which was a holiday in Mumbai. A finance ministry spokesman declined comment.
Rajeev Kumar, the top government bureaucrat overseeing banks, told Reuters in New Delhi the finance ministry had written to the country's banks to take effective steps to avoid a repeat of a PNB-like fraud. Kumar declined to comment if the government had written to the RBI.
The government action comes as federal police briefly locked down the PNB branch in south Mumbai that was at the heart of the scam and continued searches on Monday to gather evidence. The bank would have been closed on Monday anyway because of the holiday.
A source at the Central Bureau of Investigation (CBI) said the branch was likely to resume operations on Tuesday.
Besides searching the premises, the police also questioned more PNB officials on Monday, the CBI source said, taking the total number bank staff who have been questioned so far to 13.
Three people, including two employees of PNB, India's second largest state-run lender, were arrested and presented before a Mumbai court over the weekend in the case that involves billionaire jeweller Nirav Modi.
Police also questioned some executives from Nirav Modi's group, the source said.
The bank has said that the two employees arrested by police colluded with companies belonging to Modi and another jeweller Mehul Choksi, who heads jewellery retailer Gitanjali Gems Ltd and other companies.
Jeweller Modi, whose clients include Hollywood stars such as Kate Winslet and Dakota Johnson, has not commented on the allegations. Police have said Modi and his family left India before PNB filed a complaint on the alleged fraud.
Choksi has also not commented, and police have said he also left India last month.