Taxpayers must ask the government to explain why it was unable to prevent the massive fraud detected at Punjab National Bank, former Reserve Bank of India Governor YV Reddy said on Saturday. Reddy was the governor of the central bank from 2003 to 2008.

“A big fraud has come to light in the recent months involving thousands of crores in regard to one particular bank,” Reddy said at a university in Kolhapur, according to PTI. “It is clear that it is fraud. Who should be worried most about the fraud? It is the owner of the bank who stands to lose the most. The owner is the government.”

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It is the taxpayers who pay for the losses due to such banking fraud, he said. “The taxpayers who have entrusted their money to the government-owned banks should be asking the government to explain why, as the custodian of their money, it failed to prevent the fraud,” Reddy said.

“The owner [the government] should be worried about the system of monitoring and control of its own investment,” said Reddy. “That should be the focus of the owner.”

Reddy also said the Reserve Bank of India could not escape responsibility for maintaining public trust in the banking system. The magnitude of the fraud at Punjab National Bank is such that it affects the central bank’s credibility, he said, urging the RBI to review its regulatory and supervisory practices.

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The scam

On February 14, the Punjab National Bank informed the Bombay Stock Exchange that it had detected “fraudulent and unauthorised transactions” worth Rs 11,380 crore at its Brady House branch in South Mumbai. A few officials of the public sector bank had allegedly issued fraudulent Letters of Undertaking to jeweller Nirav Modi’s companies. Some of the officials have been arrested and are under investigation.

The bank later revised the figure to Rs 12,703 crore and later to around Rs 13,645 crore.