NEW DELHI: The Committee on Public Undertakings (COPU) has blamed the secrecy clause in the Banking Act as responsible for unscrupulous people to indulge in all types of malpractices which resulted in the recent bank securities loan scam, COPUs eighth report labeled in Parliament recently, calls for bringing the Reserve Bank of India, nationalized banks and financial institutions within its purview for greater accountability of these crucial planks of the economy.

The report was tabled by COPU Chairman A.R. Antulay who, addressing a news conference later, deplored the attitude of the bureaucracy. An Additional Secretary in the Finance Ministry had told the committee that it was not advisable to bring banks and other financial institutions within the purview of the committee, despite the fact that former Finance Minister Madhu Dandavate favored it while he was Finance Minister. The report said that the question of bringing the nationalized banks including the State Bank of India, its associated banks and other public sector financial institutions like the RBI, IDBI, Agricultural Refinance and Development Corporation (ARDC-later renamed NABARD) and UTI within public scrutiny had been engaging the attention of the committee since the nationalization of banks in 1968-69. The report said that the committee was “stunned” to hear from the Additional Secretary of the Ministry that only three banks namely, SBI, Bank of Baroda and Central Bank of India have so far stabilized,

The mere fact that out of 28 public sector banks, only three have stabilized during the last 23 years has strengthened the belief of the committee that “all is not well with the banks” and “RBI has failed to exercise the decided supervision and control over banks,” COPU said. As such, there was an urgent need for close scrutiny of these banks by a permanent parliamentary committee like COPU which undoubtedly would have “a detained effect on the falling standards of these banks,” it said.

Referring to the secrecy clause in the Banking Act which preclude these institutions from divulging information, the committee said that this had not prevented financial institutions like IDB Iand IFCI from subjecting themselves to scrutiny. Nor was there any case of conflict or confrontation between them and the committee in this regard, it said,

“The very fact that so far the functional officiants of active financial institutions like IDBI, IFCI, LIC and GLC, which are already within the jurisdiction of the committee, has not been impaired in any manner itself proves the weakness in the argument put forward by the Ministry” (of Finance), the report said.

Article extracted from this publication >> September 4, 1992