Apex trade association ASSOCHAM on Sunday said that all out efforts must be made by banks, regulators, government and India Inc to limit the collateral damage from the alleged fraud in the Punjab National Bank (PNB) row.
The trade body also cautioned that an over-reaction by the banks and the investigative agencies would hurt essential credit disbursement to the trade and industry and tamper the growth expectations.
“Following unearthing of the alleged scams and the media headlines, the banks are becoming cautious while there is a perceived public pressure on the regulators to act tough. Given the scale of the problem, the level of noise may be justified, but it could cause a huge loss of confidence. So, it is time to show immense restraint and use the adverse situation as an opportunity to fix the systemic issues,” said ASSOCHAM Secretary General, D S Rawat.
ASSOCHAM also said that India can learn a lot from the United States.
“We can learn a lot from the U.S. experience of handling the global financial crisis of 2007-08. The U.S. authorities worked at the root of their banking system and have put in place some robust risk mitigation and prudent system,” the chamber said.
In the present situation, while the debate on reducing government stake to below 50 percent should be encouraged, some immediate steps should be taken to do the capacity building in the Public Sector Undertaking (PSU) banks, enabling them to prevent, detect and act on frauds.
Given the technology disruption taking place and India’s ambitions to enhance digital footprints, it is all the more important to put in place robust systems which are well beyond compromise, the ASSOCHAM said.