PNB Fraud Casts Shadow On Credibility Of Indian Banks, Says HR Khan
Overseas centre may now doubt letter of credits issued by Indian banks, says RBI’s former deputy governor.
The $1.8 billion fraud detected at state-owned Punjab National Bank puts at risk the credibility of the Indian banking system, as overseas firms may now doubt letter of credits issued by Indian banks. That's the word coming in from former deputy governor of the Reserve Bank of India, HR Khan.
"One has to keep in mind what could be the implication for the standing and credibility of Indian banks in overseas centres, in terms of acceptability of our letter of credit and guarantee," he told BloombergQuint in an interview.
Some overseas regulators have in the past asked Indian banks about the safety of the buyer's credit business, and "we have taken a stance that these are safe and sound and that there are no issues", he said.
The fraud at PNB is a serious lapse of risk management, he said, adding that there’s a need to review systems and controls. "Transaction monitoring has to be a major part of the control system."
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