RBI had asked lenders to check SWIFT network: Raghuram Rajan

Breaking his silence on the PNB scam, former RBI governor Raghuram Rajan said the central bank, during his tenure, had asked lenders to take action on vulnerabilities in their operation of the SWIFT network. The RBI had also sent a list of bank frauds to the Prime Minister’s Office seeking joint action by banking investigators and enforcement authorities. Rajan, however, did not elaborate which Prime Minister the list was sent to nor if there was any action taken.

In This Pic : Raghuram Rajan

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“When a way is discovered ... for example, with the SWIFT system it was the problem at Bangladesh Bank which unearthed the problems that were there. When the problem is discovered, it is important that the regulators send the message to the banks that we have unearthed this problem, now fix it in your systems. If they haven’t, we have to understand why the banks didn’t,” Rajan said in an interview to a private news channel.

In This Pic : Raghuram Rajan

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SWIFT provides a network that enables financial institutions worldwide to send and receive information about transactions in a secure, standardised and reliable environment.

In This Pic : Raghuram Rajan

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On frauds, Rajan said the RBI’s main concern was that even after scams are unearthed, culprits are never brought to book. “We said we need to bring together all the people involved both in unearthing as well as investigating and see how we can move forward. So, we sent a list of the big frauds to the Prime Minister’s Office to try and get some action on that.”

In This Pic : Raghuram Rajan

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Rajan said that the PNB fraud threw up several questions: Why was this letter of undertaking (LoU) given? Why was it not recorded in the banking system? Did management take notice of it? Was it put before the board? And, of course, after that did auditors pick it up? If not, why didn’t they pick it up as auditors go branch by branch? Were the regulators’ instructions obeyed over time or were they not? And, why were they not obeyed? He added that since the owner in this case was the government, which appoints board members as well as the management, another question is what is their culpability in the whole thing?

In This Pic : Raghuram Rajan

Pic Courtesy : BCCL

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