CVC on RBI in PNB Case

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Why in news?

The Central Vigilance Commissioner has blamed the RBI for the Punjab National Bank (PNB) loan fraud.

What is the concern highlighted by the CVC?

RBI had switched over from a periodic audit to a “risk-based” audit.
So instead of every year or every once in 2, 3 or 4 years, auditing is now conducted only when there is a financial risk involved.
To determine risk, they must have some parameters based on which auditing is done.
But as per CVC, there was “no apparent audit” by the central bank during the period of fraud.
Hence, how are the risk parameters determined and why did the PNB fraud case not come up for scrutiny are uncertain.

What does the CVC call for?

CVC calls for a more robust auditing system in the banks.
It stressed that it was the responsibility of the banks to ensure that their business is conducted in a proper and ethical way.
On a bank’s role in checking frauds, there were “no timelines” when it comes to deeper decision making processes.
The CVC thus demanded for defined timelines.
It also proposed the need for strengthening the preventive vigilance mechanism, the guidelines and operating procedures.

How did the CVC involve?

The CVC exercises superintendence over the CBI.
Notably, the CBI is now looking into the over Rs.13,000-crore Punjab National Bank fraud case.
Also, though RBI is a regulatory body, any lack of integrity on part of RBI would be looked at by the Central Vigilance Commission.

Source: The Hindu

Quick Fact

Central Vigilance Commission

The Central Vigilance Commission (CVC) is an autonomous statutory body. It is free of control from any executive authority.
It is created to address governmental corruption and is charged with monitoring all vigilance activity under the Central Government of India.
The Commission shall consist of:

They are appointed by the President on the recommendation of a three member committee.
The committee consists of PM (as its head), the Union Minister of Home Affairs and the Leader of Opposition in the Lok Sabha.
They hold office for a term of 4 years or until they attain the age of 65, whichever is earlier, and are not eligible for further employment after their tenure.