- Nirav Modi has refused to return to India despite multiple summons
- He is believed to be trying for political asylum in the UK
- His relative Mehul Choksi is also accused of bank fraud
"They are not completely under our control and we have no role in removal or appointing the chairman and managing directors, granting licenses and a host of other measures. We have asked Government to give us more powers to exercise control over public sector banks," said the RBI governor, appearing before the Parliament's Standing Committee on Finance.
The committee headed by Congress's Veerappa Moily includes leaders from several parties besides former Prime Minister Manmohan Singh.
Celebrity jeweller Nirav Modi fled India in January nearly a fortnight before PNB, India's second-largest government bank, detected the fraud. Nirav Modi allegedly managed thousands of crores in loans he never paid back, using fake guarantees supplied by PNB officials at a branch on Mumbai.
The billionaire, who has refused to return to India despite multiple summons by the CBI, is believed to be trying for political asylum in the UK.
Sources say a senior parliamentarian questioned Urjit Patel how Nirav Modi managed his illegal transactions for several years "despite the RBI's supervisory norms". Mr Patel was also asked who was accountable for the failure.
Blaming PNB and its directors for the scandal, Mr Patel replied that the RBI had no option but to rely on the internal control system of banks. "We do not constitute an audit of banks and do not seek to replace it, this was consciously done," he told the MPs.
Mr Patel said PNB furnished a "factually incorrect compliance report" that measures had been implemented, even after the RBI had cautioned banks confidentially about similar fraud in another bank.
The CBI has asked the Interpol to issue a Red Corner Notice against Nirav Modi, which means member countries can arrest and deport or extradite him.
There are 21 state-owned banks, including the State Bank of India. Their combined losses crossed Rs 87,300 crore this year, topped by PNB. Only two banks, Indian Bank and Vijaya Bank, posted profits.