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PNB failed to check Nirav Modi-Mehul Choksi fraud, says RBI

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The Reserve Bank of India (RBI) on Tuesday blamed Punjab National Bank (PNB) of the $2-billion Nirav Modi-Mehul Choksi fraud, and accused the state-run lender of furnishing “factually incorrect” compliance reports.

“As regard for the LoUs (letters of undertaking) issued for years without collateral by the PNB branch (in Mumbai) which went unnoticed, it is pertinent to recognise that primary responsibility for understanding the risks undertaken by a bank and ensuring that the risks are appropriately managed through necessary risk mitigants, controls, etc, clearly rests with the board directors of the bank concerned,” the regulator told a Parliamentary Standing Committee when RBI governor Urjit Patel appeared.

The RBI also contended that SBI and other nationalised banks were not “banking companies” defined by the Banking Regulation Act and they were governed by other laws. It then listed nine powers that it lacked, including the mandate to appoint and remove public sector bank chiefs, license them, convene a meeting of their boards or supersede the board. Further, the RBI said it did not have powers to order voluntary amalgamation or winding up or seek the Centre’s help for suspension of a state-run bank’s business and preparation of a restructuring plan.

Also read: The UK agrees to help India in locating the fugitive diamond merchant

The statement is expected to set the stage for a fresh battle with the finance ministry, which had questioned similar claims made by Patel earlier. Finance ministry officials have maintained that it only had powers to appoint and remove bank chiefs, which was also done in consultation with the Banks Board Bureau and the RBI.

In its submission to the Parliamentary panel, the RBI said it has suggested amendments to the law to empower the central bank to exercise “effective control” over public sector banks, as it did with the private players, on “an ownership-neutral basis”.

On the issue of fraud at PNB, the RBI’s detailed response said a bank’s risks were expected to be managed under three lines of defence. The first, it said, were the officials performing the line functions to assume, own and manage risks.

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Sensex rises over 250 pts, Nifty reclaims 11,400 mark

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Mumbai | The benchmark Sensex staged a strong comeback in early trade today gaining over 250 points on widespread buying by participants in metal, realty and banking stocks after the US and China agreed to resume trade talks last night.

Taking positive cues from global equities, the 30-share index was trading higher by 262.91 points, or 0.69 percent, at 37,926.47. The index had lost 188.44 points in the previous session. The NSE Nifty reclaimed the 11,400 mark, by rising 62.15 points, or 0.55 percent, to 11,447.20.

All sectoral indices, led by metal, FMCG, realty, auto, banking, PSU, healthcare, infrastructure, power, capital goods, oil and gas and IT, recovered up to 1.38 percent.

Major gainers were Vedanta, Tata Steel, ITC, Yes Bank, Adani Ports, Tata Motors, Axis Bank, SDBI, ICICI Bank, RIL and Asian Paints, rising up to 2.13 percent

While, Wipro, Bharti Airtel, Bajaj Auto and HDFC were trading in the negative zone, falling up to 0.70 percent.

Domestic institutional investors (DIIs) bought shares worth a net of Rs 133.78 crore while foreign portfolio investors (FPIs) sold shares worth a net of Rs 825.08 crore yesterday, provisional data showed.

Investor sentiment turned positive after the US and China agreed to resume trade talks last night, traders said.

Amid a stalemate in the trade war with the US, China will send a top official to Washington this month to resume the high-level dialogue to resolve the deadlock over President Donald Trump’s demand to drastically reduce the USD 375 billion trade deficit.

Elsewhere in Asia, Japan’s Nikkei rose 0.44 percent and Hong Kong’s Hang Seng was up 0.46 percent, while Shanghai Composite Index was down 0.39 percent.

US stocks rallied to close higher yesterday. The US Dow Jones Industrial Average ended 1.58 percent higher yesterday.

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Rupee plummets to historic low of 70.09 on Turkish lira collapse

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Mumbai  |  Reversing all its early gains, the rupee today collapsed to a lifetime low of 70.09 against the US dollar, falling 16 paise amid fears that Turkish economic crisis could lead to a global financial meltdown.

The ongoing currency turmoil in Turkey has dampened investors’ sentiments globally. Investors are turning to the dollar as a safe haven with Turkeys currency lira crisis continuing since the last week.

Yesterday, the rupee had plunged by Rs 1.08, or 1.57 per cent, to a record low of 69.93 against the US currency.

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Rupee recovers from life low, up 23 paise

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Mumbai | The rupee recovered from all-time low of 69.91 and strengthened by 23 paise to 69.68 against the US dollar in opening trade at the interbank foreign exchange market today on some macroeconomic boost.

Yesterday, the rupee had plunged by Rs 1.08, or 1.57 percent, to a record low of 69.91 against the US currency amid fears that Turkish currency turmoil could turn out into global financial crisis.

In a ray of hope for domestic economy, latest data showed that retail inflation fell to 9-month low of 4.17 percent in July on declining vegetable prices which may prompt the Reserve Bank to pause interest rate hike in its next monetary policy review.

In the last two reviews, the RBI had raised the key repo rate by 0.25 percent each on inflationary concerns. The next bi-monthly policy is to be unveiled on October 5. Stock markets opening with gains also boosted the domestic currency, dealers said. However, the dollar’s strength against some currencies overseas capped the gains of the domestic unit.

Meanwhile, the benchmark BSE Sensex recovered 184.93 points, or 0.49 percent, to 37,829.83 points in early trade today.

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