As we have stated in RBI’s only press statement on this case to date, this was essentially an operational failure at our second largest public sector bank. The RBI will undertake actions against the bank that it is empowered to but this set is limited under its BR Act powers over PSBs.
Indeed, in a recent interview to the Press Trust of India, March 11 2018, the IMF Deputy Managing Director Tao Zhang has reinforced this point along with others I alluded to above: “[W]e think the PSB recapitalisation should be part of a broader package of financial reforms to speed up the resolution of NPAs, improve PSB governance, reduce the role of the public sector in the financial system, and enhance bank lending capacity and practices… The experts recommended legal changes to enable the RBI to extend all the powers currently exercised over private sector banks to public sector ones; in particular, regarding Board member dismissals, 4/8  BIS central bankers' speeches  mergers, and license revocation… Having said that, banks’ operational risk management, risk culture, internal control frameworks and external audit function should typically play a central role in preventing fraud.”  Need to refocus on the bigger issue of stressed assets resolution Let me now turn to an issue of greater magnitude and more significance than the most recent banking fraud.