Former governor of the Reserve Bank of India C. Rangarajan has stated that Indian banks need to overcome their present problems as quickly as possible to be able to provide larger amount of credit. His comments came amid the Rs 12,700 crore scam detected recently at India's state-run Punjab National Bank (PNB) and the banking system's overall struggle to overcome the mounting problem of Non-Performing Assets (NPAs).
To a query on the problems of NPAs or bad loans and frauds that have hit the country's banking system, Rangarajan said, ‘I think the banking system is stressed. It had already been stressed for some years’. He also feels that through recapitalisation and other measures, there is need to ensure that the banking system gets strong enough to be able to begin the process of lending. He noted that the primary role of banks is to raise deposits and lend money to borrowers.
Recently, the PNB had detected fraudulent transactions worth about Rs 12,700 crore at one of its branches in Mumbai. The transactions were allegedly carried out by diamond jeweller Nirav Modi by acquiring fraudulent letters of undertaking (LoUs) from the lender's Brady House branch in Mumbai to secure overseas credit from other Indian lenders.