Parliamentary panel to summon RBI governor Patel on IL&FS controversy

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The RBI governor had blamed the bank management for lapses.

Reserve Bank of India Governor Urjit Patel. (Photo: PTI)

New Delhi: After posing probing questions on demonetisation, bank frauds and swelling NPAs, the parliamentary panel will now summon Reserve Bank governor Urjit Patel to explain the IL&FS troubles that took down the stock market and created a liquidity crisis in the system.

“He (Patel) will be summoned in the IL&FS mess as to what was the central bank’s role in the NBFC crisis and why and how IL&FS evaded so much lapses with 348 subsidiaries for so long,” said a highly placed source. This meeting could happen towards the end of the month, he said.

Former minister and senior Congress leader Veerappa Moily has already said that the panel would take up the case of IL&FS for scrutiny. Veerappa Moily heads the Parliamentary Standing Committee on Finance.

As the banks struggle with frauds and NPAs, Patel’s visits to be deposed before the committee are frequent. Earlier in June this year, Patel was summoned to explain why the RBI failed to prevent the PNB fraud. The RBI governor had blamed the bank management for lapses. The RBI had reminded PNB and other banks about necessary checking on SWIFT technology, which led to the fraud. In the same deposition, he had also raised the issue of RBI lacking teeth in supervisory role over PSBs.

Parliamentarians had questioned Patel on the issue ATMs running low on cash. They had also asked him exactly how much cash returned to the banking system after demonetisation. 

In all his depositions, the governor had insisted that steps taken to bring down non-performing assets were bearing fruits and NPAs were coming down.

“Let’s hear from him what led to Rs 91,000 crore of debt in IL&FS and what was RBI doing to check while this was happening,” said the source. “It is a public limited company piling up losses, paying huge salary to the management and faulting on interests, no one is accountable?” the source wondered.

The government has replaced the entire IL&FS board with its own set of people in order to find an early resolution to a debt-default driven crisis.