Tuesday, May 18, 2021
Home News Reports Raghuram Rajan's answers on the PNB scam and controversial 20:80 rule do not pass...

Raghuram Rajan’s answers on the PNB scam and controversial 20:80 rule do not pass muster

The media’s blue-eyed boy and former RBI Governor Raghuram Rajan today finally broke his silence around the PNB scam and other issues relating to it. Rajan was the RBI Governor for 3 years when the PNB scam was on-going.

In an interview to CNBC TV 18, Rajan was point blank asked who was to blame for the PNB scam. Rajan replied that there was “plenty of blame to go around” and named everybody from the management, the board of the bank to the auditors.

With regards to the RBI’s role, Rajan asked why the instructions of the RBI were not obeyed over time. He also revealed that back then he had expressed concern that although the RBI unearth’s frauds, but it could never bring to book the culprits. He also said that generally when the regulator spots a problem, it sends a message to the banks, and “basically assumes to some extent that the banks have fixed it”. He reiterated that “But surely there is plenty of responsibility to spread around.”

Sadly, Rajan’s answers expose him and the RBI:

1. Does the RBI had no responsibility to check the functioning of the banks to see if such frauds are being committed? Can it simply pass the buck to the others involved? If so do we even need the RBI?

2. Is it enough to “assume” that the banks have fixed a problem once the RBI identifies it? Does the RBI and its chief not have a duty to see if their instructions have been followed?

3. Rajan is now expressing concern that RBI was basically a toothless body. Did he make any moves to change this status?

He was also the RBI chief when the controversial 20:80 rule was notified by it, as one of the last order of the Finance Minister Chidambaram. It is believed that almost 50% of the entire benefit was cornered by 7 companies and Mehul Choksi’s Gitanjali Gems was again one of them, while 13 private companies in total benefited from this scheme. The India Bullion and Jewellers Association (IBJA) had written a letter to the then Reserve Bank of India Governor, Raghuram Rajan, warning him of the perils of the 20:80 scheme and accusing the Congress government of “deliberately yielding to the cronies” by changing the gold policy days before demitting office.

On the 80:20 scheme, Rajan said that the scheme should be separated from the Nirav Modi scam:

As far as I understand, the Punjab National Bank (PNB) scam started in 2011 and was unearthed in 2018. The gold scheme that is under the scanner at this point was something which lasted between May 2014 and November 2014. It seems to me very hard to argue that whatever happened then and I am happy to talk more about that, but whatever happened there was in any way related to the scam other than it happened in the same industry that there was gold involved. It is important to treat these as two separate issues

He, however, appeared to defend the 20:80 scheme:

Happy to talk about the 20:80 because the actions there as far as I understand were justified.

He further tried to shift blame on this scheme as well by claiming that the Government (the then UPA Government) was the “prime mover” in this scheme. He also justified the scheme by citing forex problems and Current Account Deficit. He also said that the beneficiary companies were selected by the Department of Trade in the Commerce Ministry. He also accepted that like any constraints being put on a system, some people could have made money and some would have lost money, and those who lost would have complained.

When asked about the timing of the 20:80 rule i.e. just a few days before a regime change, Rajan tried to avoid the issue and said he did not know the rationale behind the Government’s move. He also said that it was a period of rapid regulatory change due to a forex crisis. In the end, he does accept that as RBI Governor he does bear responsibility for any instruction from his office.

When asked if he could have said “No” to the Government, he spoke on other issues like suggesting that every policy would have good and bad effects. He again referred to the Government’s definition of selected importers and said that the RBI followed it. He then claimed that if the new NDA Government could have acted immediately if they thought this was an issue of importance. He also said that “procedures were followed” which was important. No direct answer to the question whether he could have said “No”.

Is this the same Raghuram Rajan who frequently commented on matters beyond the RBI’s jurisdiction, especially on the Government’s other actions? Is this the same Rajan who gave the famous quip: “I am Raghuram Rajan, I do what I do”? Rajan could not clearly answer whether he could have said NO to Chidambaram and if he did not say so, why he chose to not do so?

Clearly, the former RBI Governor has more to answer.

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

Related Articles

Trending now

Congress toolkit says party blocked beds in ‘friendly’ hospitals amidst COVID-19 crisis to paint itself as a messiah on social media

Social media is awash with a new toolkit, allegedly created by the Congress party, detailing its plan to extract political mileage.

Congress toolkit exposes nexus between the party and international media, used journalists to peddle anti-Modi propaganda

A new Congress toolkit is circulating on social media that reveals the depths to which the party sank during the pandemic.

Congress cries foul as its bombshell ‘toolkit’ stands exposed, threatens to take legal action

AICC Chairman in a Tweet threatened that a case is being filed against BJP leaders JP Nadda and Sambit Patra for forgery.

Latest Congress toolkit: Paint Kumbh as Covid superspreader, and Eid as ‘happy gathering’. Here are the details

From maligning Kumbh to attacking Prime Minister Narendra Modi for the Central Vista project, working with 'friendly' journalists to get 'tailored' articles defaming India and Modi govt, here is what the Congress 'toolkit' asks its social media and PR teams to do.

Charity ‘toolkit’: How Sonu Sood’s foundation sought help from BJP’s Tejasvi Surya but took all the credit himself

Netizens have often raised suspicions that Sonu Sood had been falsely claiming credit for arranging help for Covid-19 patients without having done so.

‘This is your blessing’: INMAS director whose team developed 2-DG drug thanks his physics teacher Rajnath Singh

Dr AK Mishra, the director of INMAS, stated that Raksha Mantri Rajnath Singh was his physics lecturer back in the 1980s.

Recently Popular

Odisha: Sonu Sood clarifies after Ganjam DM says they had not received any communication from him regarding bed for COVID patient

The Collector and District Magistrate of Ganjam has called out Sonu Sood after the actor claimed to have arranged a bed.

Pakistan based CNN contributor Adeel Raja says world needs another Hitler amidst Israel-Palestine conflict, has history of anti-Semitic tweets

Adeel Raja, freelance contributor at CNN, has said that the world needs a Hitler today amidst the Israel-Palestine conflict.

Vinod Dua’s daughter, who wanted all ‘bhakts’ dead, receives help from a ‘bhakt’ MP while her mother needed critical COVID medicines

BJP supporters lodged their protest about minister chipping in to help the elites in India, when commoners are equally suffering, especially when the elites have not asked for their help.

Haryana: Police rules out communal angle in murder of Mewat youth Asif, two groups are old political rivals. Details

As per police, Asif had beaten up Pradeep's group members 20 days back, and Pradeep decided to avenge the attack.

Assam: Six arrested for disrespecting national flag, accused caught using tricolour as table cloth for Eid feast

An image of Rejina Parvin Sultana, a resident of Assam's Tengnamari village, feasting lunch with her family on the occasion of Eid had gone viral on the internet.

When Vinod Dua spewed venom against PM Modi even when he was hospitalised

Venom-spewing "journalist" Vinod Dua had talked against PM Modi even when he was hospitalized in March 2021
- Advertisement -


Connect with us