Finance Minister Arun Jaitley on Tuesday asserted that the Government will pursue the cheaters of the recent bank frauds ‘to the end’ and questioned the management of the lenders and their auditors for failing to check the scams. Breaking his silence over the Punjab National Bank (PNB) and Rotomac scams, Jaitley said the Government efforts to straighten the banks through recapitulation and reduction of debts have been “challenged” by these frauds.

The Finance Minister was addressing the annual meeting of Association of Development Financial Institutions in Asia & Pacific (ADFIAP) in New Delhi.

Jaitley did not name the alleged kingpin of the fraud, billionaire jeweller Nirav Modi, or PNB, but he questioned the ethics of some businesses in the country and asked why the banks’ internal and external auditors could not detect the fraud which had been going on for seven long years.

“It is incumbent on us as a State, till the last legitimate capacity of the State, to chase these people (fraudsters) to the last possible conclusion to make sure the country is not cheated,” the Minister said.

Jaitley said the Centre has been step by step addressing issues like high-level of bad debts and need for more capital, but the effort has been put to challenge with the unraveling of the fraud.

Reminding the public sector banks that Prime Minister Narendra Modi gave managements the autonomy they needed, Jaitley said, “When authority is given to the managements you are expected to utilise that authority effectively and in a right manner. Therefore, the question for the management itself is were they found lacking? And on the face of it the answer seems yes they were,” he added.

The lenders, he said, were “unable to check who amongst them were delinquent”. He went on to ask what the auditors were doing.

“Both internal and external auditors really have looked the other way or failed to detect,” he said.

Chartered accountants and those who control the discipline, should start introspection and “say what legitimate actions are to be taken”, he said.

“And also there is an important challenge where the supervisory agencies are now to introspect as what are the additional mechanisms they have to put in place to ensure that stray cases don’t become a pattern again,” he said. “And stray cases are nipped in the bud and an example be made out of people that these bad examples itself are never to be repeated.”

Claiming that the bank frauds have a cost to the country as well as to the tax payer, he said, “…”It’s a direct cost and it has an indirect cost that it impinges on development, which impinges on the lending capacity of banks as an institution and therefore impinges upon developmental Finance.”

On the banking sector, the Finance Minister said financing for trade and businesses increases when banks have the ability to lend. This ability over the past few years has faced challenges in increased bad debt or NPAs. “One of the direct consequences of this was that the ability of the State to spend and lend even for developmental activities itself will get curtailed,” he said.

After struggling to find solution, the Government “finally hit upon the right point through the insolvency and bankruptcy code” that provides for recovery of due amounts through sale of assets of defaulters.