A parliamentary panel has expressed concerns about recent arrests of top bankers.

Sources in the parliamentary committee on finance told CNBC-TV18 that the banking sector is in desperate need for reforms and the current non-performing assets (NPA) and bank fraud crisis is the result of poor governance by the government and the Reserve Bank of India (RBI).

On July 7, two senior retired officials of Bank of India were arrested for an alleged loan fraud of Rs 2,654 crore.

In June, a chief executive officer and former managing director of Bank of Maharashtra was arrested and in January last year, a former IDBI Bank chairman was arrested along with four executives of the same bank.

Recently, Indian Banks Association had condemned arrests of bankers.

A senior member of the parliamentary committee on Finance said, “Error of judgement in a commercial decision cannot be penalised, unless there is proof of malafide.”

He went on to say that not just Central Bureau of Investigation (CBI), Enforcement Directorate and Vigilance, even the local police is going after bankers and in such a scenario, how will they take day to day decisions.

Sources also indicated that the parliamentary committee may hold the government, RBI and banks accountable for the present crisis.

The panel may urge the government to reform the banking act and give more powers to the RBI to regulate the working of the banks.

Parliamentarians feel that it’s poor governance in the banking sector, which has led to a huge rise in NPAs.

The banking sector is struggling with rising NPAs, which touched Rs 8.99 lakh crore or 10.11 percent of the total advances at December-end 2017.

Of the gross NPAs, the public sector banks accounted for Rs 7.77 lakh crore.

The same panel has held several meetings on demonetisation as well and its members are now questioning the intent behind demonetisation.

Sources said, “The GDP has come down by one and a half to two percent. Problem of black money and fake currency has not been solved and black money is becoming white, so the whole purpose has been frustrated."

The parliamentary panel, which consists of members across party lines is likely to submit separate reports on NPAs and bank frauds and a separate one on demonetisation by the end of the monsoon session.

First Published:Jul 20, 2018 12:01 PM IST