Finance Minister Arun Jaitley on Tuesday said the government would make every effort to chase “unethical” businesses to ensure they pay their dues, while stressing that supervisory agencies must introspect and ensure such “stray cases” do not become a pattern.
In his first official reaction since the ₹11,400-crore fraud by billionaire diamond jeweller Nirav Modi was reported by Punjab National Bank, the Finance Minister also questioned how the bank management and auditors did not detect the scam.
“We now have emerging challenges, which strike at development and growth,” Jaitley said at the 41st annual meeting of the ADFIAP, adding that it affects the lending capacity of banks. Noting that the banking system functions based on trust, which is inherent in the lender and creditor relationship, the Minister said that a “not-so-ethical” section of businesses think they do not need to pay back loans.
“Such stray cases throw up important questions,” he said, adding that it is incumbent on the state to chase such people to the last possible stage and make sure the country and honest taxpayers are not cheated. Jaitley also said that though state-run lenders have been given authority, the management was expected to use it effectively. “Were they found lacking? Yes,” he said.
He also questioned whether internal and external auditors failed to detect the fraud or looked the other way.
“These developments have a direct cost to the country and taxpayers and also have an indirect cost on lending and development finance,” he said.
The Minister noted that the government has implemented the Insolvency and Bankruptcy Code and also cleared the bank recapitalisation plan to help state-run lenders battling high non-performing assets (NPAs).
But he pointed out that concerns over the moral issues over bank recapitalisation were also raised as it is the taxpayers who have to pay for the high NPAs.