by admin | May 25, 2021 | Corporate, Corporate finance, Corporate Governance
New Delhi : The government has ordered investigation to be carried out by the Serious Fraud Investigation Office (SFIO) into the affairs of 107 companies and seven limited liability partnerships (LLP) pertaining to multi-crore fraud in Punjab National Bank (PNB), Lok Sabha was informed on Friday.
“The government has ordered investigation into the affairs of 107 companies and 7 LLPs under the provisions of Section 212(1)(c) of the Companies Act, 2013 and Section 43(3)(c)(i) of Limited Liability Partnership Act, 2008 on 17.02.2018 belonging to Nirav Modi (Firestar Diamond group) and Mehul Chinubhai Choksi (Gitanjali Group) to be carried out by the Serious Fraud Investigation Office connected with Punjab National Bank Fraud wherein all matters in their entirety will be examined,” Minister of State for Corporate and Law & Justice, P.P. Chaudhary said.
The investigation is under progress, he informed.
On March 7, continuing the probe into the PNB fraud, sleuths of the SFIO questioned the bank’s Managing Director and CEO Sunil Mehta for five hours.
The SFIO had also summoned top executives of ICICI Bank and Axis Bank for questioning into this matter.
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate Buzz, News, Politics
New Delhi : In light of the massive Rs 11,300 crore ($1.8 billion) scam allegedly involving jeweller Nirav Modi that has hit state-run Punjab National Bank (PNB), industry chamber Assocham said on Sunday that the government should surrender its majority control of banks, which should be allowed to function like private sector lenders.
In a regulatory filing earlier this week, PNB said it had detected the gigantic fraud in one of its Mumbai branches, putting the quantum of fraudulent transactions at $1,771.69 million. The amount is equivalent to eight times the bank’s net income of about Rs 1,320 crore ($206 million).
“The PNB’s fraudulent transactions worth Rs 11,300 crore should act as a strong trigger for the government for reducing its stake to less than 50 per cent in the banks which should then be allowed to work on the lines of private sector lenders with a full sense of accountability to their shareholders protecting interest of depositors,” Assocham said in a statement here.
“The public sector banks (PSBs), ironically, are slipping from one crisis to the other and there is a limit the government can keep bailing them out at the cost of taxpayers’ money, even if it is the principal shareholder in these lenders,” it said.
The industry body said PSB senior managements spend bulk of their time “receiving and implementing directions from the bureaucrats even for innocuous issues.”
“In the process, the core banking functions, including all important risk mitigation and management, take a back seat.”
“The problem has become more grave with banks adopting new technologies which can prove both boon and bane,” it added.
In this connection, a Special CBI Court in Mumbai on Saturday remanded to police custody till March 3 three accused persons in the case.
The three includes a retired PNB Deputy Manager Gokulnath Shetty, Single Window Operator Manoj Kharat and an authorised signatory of the prime accused Nirav Modi’s group companies.
Besides these, the Central Bureau of Investigation (CBI) has named 10 other directors and officials as accused in the scam.
“Once the government equity in the banks is reduced below 50 per cent, there would be much more autonomy along with accountability and responsibility of the senior management,” Assocham said.
“The boards should then be truly taking the policy decisions while the CEOs would run the banks with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions,” it added.
Assocham Secretary General D.S. Rawat in a statement urged the Reserve Bank of India (RBI) to take the lead to “engage with the industry in finding ways to do clean business in the entire financial sector, be it the public sector or private sector banks or even the non-banking finance companies.”
In this regard, Chief Economic Advisor (CEA) Arvind Subramaniam has also advocated more private participation in public sector banks.
Speaking at an event in Chennai on Saturday, Subramaniam said while the government was going for recapitalisation of public sector banks, the scrutiny, monitoring and disciplined deployment must be ensured only through greater private participation in banks.
According to him, there should be less public lending to private sector and the mode to achieve that is to have higher private participation in the banking sector.
He said more privatisation could be the way forward since there was no guarantee that better governance recommendations of banks, instead of privatisation, would be implemented effectively.
—IANS
by admin | May 25, 2021 | Corporate, Corporate Buzz, News, Politics
By Venkatachari Jagannathan,
Chennai : Only the naive would believe that just two officials were involved in the $1.8 billion fraud in Punjab National Bank (PNB) and that the whole bank was in the dark for the past seven years, said a top leader of a major bank union.
He also asked the PNB management to reveal what kind of due diligence was done on diamond trader Nirav Modi and his companies before extending a loan of Rs 1,700 crore.
“The PNB management is blaming other banks for not sharing details of their due diligence done on Modi’s business. The $1.8 billion fraud is done on non-fund based transaction. The PNB management has to clarify what kind of due diligence it had done while lending to Modi’s firms a sum of Rs 1,700 crore,” C.H.Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA) told IANS.
He also said the BJP government has not appointed workman and officer directors in public sector banks and that had weakened the checks and balances.
The PNB had said the alleged fraud was carried out by two staffers by not entering the transactions in the bank’s core banking solution but only in SWIFT signalling another bank’s overseas branch that the transaction is valid.
According to PNB’s complaint, some fraudulent issuance of Letters of Undertakings (LoU) were detected at its Brady House branch in Mumbai. The complaint said that the fraud came to light after the retirement of the deputy manager in the Brady House branch when employees of a set of partnership firms linked to diamond trader Nirav Modi presented import documents and asked for credit to pay their suppliers in January this year. The branch officials had asked for 110 per cent margin for issuance of LoU.
However the partnership firms argued that they had been availing such a facility in the past, but the branch officials did not find any official record in support of their argument.
It is clear, PNB stumbled upon the fraud by providence and not by its own intelligence, Venkatachalam said.
Simply put, LoU is a guarantee issued by a bank to another bank or its branch located in a foreign country. As per the LoU, the foreign bank or the foreign branch of an Indian bank would deposit the required sum in the Nostro account of the LoU issuing bank in that country. The importer then is paid the money.
When the borrower defaults, the foreign bank or the foreign branch of an Indian bank would claim its dues from the bank that issued the LoU.
According to PNB, the total fraud discovered linked to diamond trader Modi under the LoU was around $1.8 billion.
“There must be involvement of top officials of PNB to facilitate Modi’s fund needs. A high profile person like Modi would not directly deal with a low level officials at branch level,” Venkatachalam said.
A retired senior official of a government bank K.Srinivasan told IANS: LoUs are issued for a fee. Banks daily deploy their funds in various investment avenues including call money market. So, huge deposit in Nostro account would have been known to the PNB. Further the fee earned on such LoUs must have been booked,” Srinivasan said.
Srinivasan said, PNB management cannot simply say for seven years they were in the dark about the fraud.
Similarly, it is strange as to how the auditors — internal, statutory and concurrent — as well as the inspection team from RBI missed to check the deposits in Nostro accounts, the withdrawals from there and the fee income earned on LoUs, Srinivasan said.
Meanwhile, the Reserve Bank of India (RBI) some time back had asked the Indian banks to link core banking solution and the SWIFT network and also encrypt the messages sent using the SWIFT system, said a senior official in a core banking solution company.
“Some of the old version of core banking solution are not linked to the SWIFT system. As a result, bankers used to feed the fund transfer or other transactions in their core banking system and then send the necessary message to an overseas bank using the SWIFT console, the senior official in a banking software company told IANS preferring anonymity.
The SWIFT or the Society for Worldwide Interbank Financial Telecommunication is a network used by financial institutions to communicate financial transactions.
He said the PNB must have been using the old version of core banking solution without updating the same.
(Venkatachari Jagannathan can be reached at v.jagannathan@ians.in)
—IANS
by admin | May 25, 2021 | Corporate, Corporate finance, Corporate Governance, News, Politics
Mamata Banerjee
Kolkata : West Bengal Chief Minister Mamata Banerjee on Thursday demanded a thorough investigation into the fraudulent transactions worth $1.8 billion in Punjab National Bank and said she would not let the Central government off the hook until the people’s money is secured.
Banerjee said she has written to the Finance Ministry to scrap the proposed Financial Resolution and Deposit Insurance (FRDI) Bill.
“Today people are shocked to see what has happened in the Punjab National Bank in Mumbai. There has been a scam of Rs 11,000 crore. This is the money of common people. Who took away the money? Who ate it up?” she asked during a public meeting in Jhargram district.
“Offenders will run away after stealing the money but what will happen to the common man? Scams like this must be investigated. The security of people’s money must be ensured. We will not let them (the Central government) off the hook until that happens,” she said.
PNB, the second largest public sector bank in India, detected some fraudulent and unauthorised transactions (messages) at $1,771.69 million (around Rs 11,515 crore) in one of its branches in Mumbai for the benefit of a few select account holders.
The fraud was detected on Wednesday in the PNB’s Brady House Branch in south Mumbai, which is its second-biggest lending branch in the country. A CBI probe has been initiated into the matter and 10 employees of the bank have been placed under suspension.
Accusing the Centre of trying to take away the people’s money deposited in the banks with its FRDI Bill, Banerjee said she has written two “strong letters” to the Finance Ministry demanding the withdrawal of the bill.
“We asked the government to withdraw the bill as they are trying take away the money of the common people. This must not happen. The finance minister acknowledged my letter but then sent a reply through a state minister saying the bill would not impact anything,” the Trinamool Congress supremo said.
“Today I have written one more strong letter before coming here demanding the withdrawal of FRDI bill. Eating up the money of common man will not be allowed.”
—IANS
