Industry chambers CII and Assocham on Sunday asked the government that the PNB fraud should not hinder bank loans to businesses which were showing signs of revival after being hit by demonetisation and GST.

New Delhi: Industry chambers CII and Assocham on Sunday asked the government that the PNB fraud should not hinder bank loans to businesses which were showing signs of revival after being hit by demonetisation and GST.

“Such financial malfeasance perpetrated by a collusion of unethical business entities and corrupt officials should not lead to a situation where funds to industry get choked,” said Shobana Kamineni, president, CII.

She called for a twin strategy for tackling financial frauds, including better monitoring and supervision of banks and spread of best corporate governance standards.

Assocham also cautioned against allowing the alleged fraud in PNB to halt the entire system of corporate lending as demoralisation would set in among the top functionaries and employees of the state-owned banks, something the country can ill-afford at a time when the credit growth was about to recover and economy was set to grow at a higher pace.

“While we may seek long-term solutions like privatisation of the banks, the need of this hour is to rally around honest bank officers and the honest business entities which have built trust on each other. Let one or a few black sheep not derail our financial system, which is resilient enough to withstand this kind of shocks, though ideally such jolts are better avoided and averted through systemic reforms,” said Assocham.

It said that there were reports about banks clamping down, certain impractical rules and procedures for trade finance, affecting both importers and exporters. 

“The letters of credit or letters of undertaking are an internationally accepted system of global trade. While we need to ensure safe and sound functioning of the system and not allow loopholes like those in the PNB system of money or guarantee transfer, let banks not over-react and hit the trade and industry,” it said. 

Assocham urged the finance ministry and the RBI to send strong messages across different stakeholders about the robustness of the Indian financial sector, giving, though a tough warning against offenders. “By all means, punish the offenders at a fast speed and set examples; but the business should not be allowed to halt,” it added.