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India's central bank sets up panel to review, strengthen oversight

As the alleged fraud scheme discovered at Punjab National Bank unfolds, India's central bank said it has appointed a five-person panel to review and strengthen its oversight of commercial lenders.

The panel will look into "factors leading to an increasing incidence of frauds in banks" and the under-reporting of bad loans, the Reserve Bank of India said in a Feb. 20 statement.

The panel, to be headed by a former RBI central board member, Y.H. Malegam, will also recommend new measures to prevent these incidents, the statement added.

On Feb. 14, Punjab National Bank disclosed that it had detected US$1.77 billion of "fraudulent and unauthorized" transactions at one of its branches in Mumbai and reported them to law enforcement agencies. The Indian government has asked Punjab National Bank to conduct a forensic audit into why the multibillion-rupee fraud remained uncovered from 2011 until now.

Separately, on Feb. 9, State Bank of India said an RBI audit found its nonperforming loans for the year ended March 31, 2017, should have been 1.356 trillion rupees, not the 1.123 trillion rupees the lender reported previously. Meanwhile, HDFC Bank Ltd. said the RBI's audit found its nonperforming loans for the same fiscal year should have been 79.37 billion rupees, 34.8% more than the 58.86 billion rupees reported by the bank.

As of Feb. 20, US$1 was equivalent to 64.91 Indian rupees.