Apportioning blame to the Reserve Bank of India (RBI) over the PNB loan fraud, Central Vigilance Commissioner K V Chowdary recently said there had been "no apparent audit" by the central bank during the period of the scam.
Chowdary stressed the need to put into place a more robust auditing system.
"They did not do this (an audit)," the head of the probity watchdog told PTI.
The CVC exercises superintendence over the CBI which is looking into the over Rs. 13000-crore Punjab National Bank fraud case.
The RBI had the regulatory responsibility for the banking sector but any lack of integrity would be looked at by the Central Vigilance Commission, he added.
Chowdary said according to the RBI it had switched over from a periodic audit to a "risk-based" audit which is conducted when there is a financial risk involved.
"To determine risk, they must have some parameters. Based on that they would have done that (auditing). (But) there was no apparent audit by the RBI during this period (of fraud)," Chowdary said.
Union Finance Minister Arun Jaitley had in February slammed regulators for failing to detect the fraud, saying that unlike politicians, regulators in the Indian system were unaccountable.
Chowdary pointed out that the RBI issues general guidelines as a regulator and also when foreign exchange is involved.
"They are not going to see from branch to branch and bank to bank what they are supposed to do," he said.
It was primarily the responsibility of the banks to ensure that their business was conducted in a proper and ethical way, he added.
He said when something goes wrong, "one cannot blame everybody".
"There is a systemic issue (here). They (RBI) have decided instead of every year or every once in two, three or four years, they will do it (risk-based auditing).
"It is a good policy. But how they determine the risk parameters... and why this (fraud) did not come up are matters of detail," Chowdary said.
He, however, clarified that it was not just the PNB where an alleged fraud had taken place or that other banks were "100 per cent correct".
"But we have to only hope that they (the other banks) have a better system and that they are following the system," Chowdary said.
On a bank's role in checking frauds, Chowdary said there are "no timelines" when it comes to deeper decision making processes.
"There should be defined timelines. The preventive vigilance mechanism has to be strengthened. The guidelines and operating procedures have to be strengthened. It has to be ensured that they are followed," he said.
Asked about the investigation in the PNB scam, he said what the CVC was doing in the case could not be disclosed now as "it is work in progress".
"There are so many issues that the CVC is examining both with reference to the PNB and RBI," Chowdary said.
The CBI is among various agencies looking into the over Rs. 13,000-crore fraud allegedly committed by billionaire jeweller Nirav Modi and his uncle and Gitanjali Gems promoter Mehul Choksi.