Home > 2018 > AIBEA Demands CBI Inquiry into PNB Fraud to Book the Culprits

Mainstream, VOL LVI No 10 New Delhi February 24, 2018

AIBEA Demands CBI Inquiry into PNB Fraud to Book the Culprits

Friday 23 February 2018


The following is a press release issued by C.H. Venkatachalam, the General Secretary of the All India Bank Employees’ Association, on February 18, 2018.

At a time when banks are facing the problem of huge irrecoverable bad loans and getting into losses due to provisions to be made from the profits earned, the PNB—NIMO fraud has come as a huge shock exposing the increasing trend of corporate loot of banks and thus, the people’s money.

Attempts are being made to dilute the magnitude of the fraud as one bank one branch two employees fraud. Such huge frauds cannot be committed in a simple way that a branch official would give LoU for Rs 11,400 crores in a period of six or seven years without anyone knowing about it. No doubt there has been serious complicity of the branch official. But it is naïve to believe that no one else is involved in this racket. At least it could not have happened without the knowledge of Nirav Modi in whose favour these LoUs have been given. The fraud has raised a number of questions on technology issues, supervision, monitoring, audit, internal control, etc. besides role of RBI in the whole episode.

• How is it that the RBI, which carries out a regular audit of the banks, not even smelt the fraud, despite the number of years and the volume of money involved?

• Was the software SWIFT, that was used for the fraud, approved by the RBI or not for the banking sector? If not, why did the RBI not examine this thoroughly and evaluate the risk?

• The famous Harshad Mehta scam was because of the so-called “innovative” measure of banking receipts that landed the banking sector in deep crisis. The Nirav Modi fraud has exploited the new instrument Letters of Undertaking. Is the RBI going to do something about this?

• In all probability the RBI will disown LoUs as it had the banker’s receipts. If so, why did not the RBI question the banks about these guarantees, examine the risks, and create the necessary firewalls to make the taxpayers’ money secure?

• Clearly the RBI has failed miserably to fulfil its role as a regulator of a vulnerable banking sector. Why is the Governor silent? Is it his case that now a ‘delinquent employee’ can help in a fraud of over Rs 11,000 crores without being detected? If so, isn’t the RBI admitting a complete collapse of the banking sector, where instead of being a regulator it’s inefficiency and apathy makes it a risk to the country.

• Why was that branch official kept in the same branch/department for so many years contrary to rules? What is the explanation of the higher controlling offices?

• What about Banks Nostro account, is there no control on the entries in this account? Or, in what manner has the fraud been perpetuated?

• When Nirav Modi’s other loans were sanctioned and renewed, why were his huge business volume, import bill business, etc. overlooked?

• Is it that any employee can issue a LoU and advice the foreign correspondents by SWIFT without anyone’s knowledge? If so, is it banking at all?

• Does the top management believe that only some local official is involved and the top management has no accountability?

• By suspending only lower level branch staff, do they want to extricate themselves from the whole affair? What is sauce for the goose must be for the gander too.

While we do not support the wrong-doers at the lower level, the impression is given that only the lower level officials and staff are responsible. Why such a haste and hurry to suspend them? It will be prudent for the government to step in and keep out the entire top management and higher officials from the bank until the probe is completed and accountability is fixed. This is the general expectation of the rank-and-file employees and officers at the lower level in all the banks.

It is very strange that EDs, MDs, CEOs, Chairmen, Directors of the banks are not covered by any Disciplinary and Conduct Regulations though they take very vital decisions. They are also to be covered by the same set of rules like other officers of the banks. The government should look into this aspect also.

ISSN : 0542-1462 / RNI No. : 7064/62 Privacy Policy Notice Addressed to Online Readers of Mainstream Weekly in view of European data privacy regulations (GDPR)