RBI Governor Urjit Patel, who was on Tuesday grilled by parliamentarians over challenges being faced by the banking sector including the huge number and size of bad loans and frauds like the one in Punjab National Bank, sought more powers for the central bank to oversee Public Sector Banks (PSBs).
Patel, summoned by the Parliamentary Standing Committee on Finance for questioning in relation to these issues, said that the situation has improved and the Reserve Bank of India (RBI) has taken some measures to strengthen the banking system.
He appeared along with the Deputy Governors and deposed under the topic "Banking Sector in India issues, challenges and the way forward including Non-Performing Assets in banks and financial institutions".
The meeting was chaired by Congress leader Veerappa Moily and attended by former Prime Minister Manmohan Singh among others.
Answering questions for over three hours, Patel said that the RBI "needs more powers to oversee PSBs", sources present in the meeting said.
A source told IANS that Patel briefed about the current situation and said it has improved with regard to the issue of the Non-Performing Assets (or bad loans).
The central bank has taken some measures to strengthen the banking system, Patel said but pointed out that the RBI did not have "sufficient powers" to discipline Chairmen of banks or change members of their Boards.
During the meeting, sources said, the Governor faced tough questions from lawmakers on bad loans, bank frauds, cash crunch and other issues.
Some members of the committee also sought to know about the reasons for recent instances of ATMs running out of cash and NPA crisis and bank frauds (Nirav Modi).
Patel had earlier given a written submission about the corrective measures that have been taken.
Sources said that Patel informed that measures adopted by the RBI to tackle the crisis include prompt corrective action framework, implementation of Insolvency and Bankruptcy Code and a new resolution framework.
An MP said that Patel did not give any reply to some questions on demonetisation.
Citing reports of experts on the notes in circulation, which was earlier stated to be around Rs 17 lakh crore and has now increased to Rs 18.5 lakh crore, a member said that this was contradicting the purpose of demonetisation.
About the latest situation on the notes in circulation, Patel is reported to have said said that the RBI would give the answer later.
Another member said people have lost trust in the banking system and everybody is withdrawing cash while ATMs are depleted. "People are putting the money somewhere else which is going to be a run on the bank," he is believed to have said.
In response, the RBI Governor said, "everything is fine".
He was also asked about Punjab National Bank and told that LoUs were going from "Nirav Modi to Nirav Modi" which the banks are supposed to inspect.
Another member told the Governor that RBI was not fulfilling its obligations to the people to which Patel said he will reply to these questions later.
He also said the International Monetary Fund and World Bank have praised its regulatory role.
The next meeting of the committee will be held on June 19.