The Ketan Parekh fraud and supervisory lapses of the Reserve Bank of India (RBI): a case study

Abstract

Purpose

The purposes in this paper are: engaging in a critical examination of the framework of the banking regulatory framework in India; assessing the operational efficacy of banking regulatory and supervisory mechanisms; and providing an in‐depth legal analysis of the role of the Reserve Bank of India (RBI) as the country's central bank and the principal supervisory authority.

Design/methodology/approach

The method used is legal examination of regulatory practice and case‐study based analysis. It relies factually on official publications in the public domain, academic writings and newspaper reports to assess the impact of the fraud and explore the legal, regulatory and financial implications of the supervisory lapses.

Findings

The findings in the paper relate to the impact and extent of he Ketan Parekh fraud and the nature and scope of critical central banking supervision lapses. The paper concludes that such lapses can induce systemic problems in a key emerging economy like India especially when it is rapidly entering the second phase of major banking and financial reforms.

Research limitations/implications

Various investigations are still underway as regards the Ketan Parekh fraud and several cases are being heard in courts and tribunals. The full extent of legal and regulatory liability is yet to be fully ascertained.

Originality/value

It is of immense significance to bankers, lawyers, auditors, consultants, researchers, jurists, law enforcement officials and those involved in financial and banking regulation.

Citation

Ghosh, S. and Bagheri, M. (2006), "The Ketan Parekh fraud and supervisory lapses of the Reserve Bank of India (RBI): a case study", Journal of Financial Crime, Vol. 13 No. 1, pp. 107-124. https://doi.org/10.1108/13590790610641279