PSU banks' governance needs a re-look, says RBI Governor

Reserve Bank of India (RBI) Governor Raghuram Rajan has said there is need for a re-look at the governance of the public sector banks.

"I would like to suggest to look at the governance of the public sector banks and understand the deficiency there and try and improve it. There are lots of highly qualified and reputable people working in public sector banks," he told reporters at a media briefing after the third bi-monthly monetary policy review for fiscal 2014-15.

Asked about the recent Syndicate Bank incident, Rajan said: "There is an investigation on the way for Syndicate Bank, but I think we have to be very careful about extrapolating this issue to the entire banking system without thinking further to it. It does raise troubling issues in particular situation and it is important for agencies to ensure that full investigation is done."

The Central Bureau of Investigation (CBI) on Saturday arrested SK Jain, chairman and managing director of the state-owned bank, along with five others for allegedly taking a bribe of Rs 50 lakh to extend credit facilities of some companies. Jain was arrested in Bangalore.

"I would emphasize that one should not extrapolate this to the entire public sector banking system and assume that all the problems in public sector banking system are because of criminality rather than because of other factors. The balance has to be maintained," Rajan said.

"We have to be also careful that while we do a thorough investigation and culprits are brought to book, it does not become a witchhunt, which can stall the entire credit process," he added.