Is Modi govt's first big scalp in Nirav Modi scam just a sacrificial lamb?
Soon after the Central Bureau of Investigation (CBI) filed a charge sheet in the Nirav Modi-Punjab National Bank (PNB) scam that mentioned Usha Ananthasubramanian, a former chief executive at the bank, the government was quick to take away all the powers she enjoyed as the head of Allahabad Bank.When the Rs 13,000-crore scam, involving Modi, his uncle Mehul Choksi and some PNB officials, has been running for about seven years under three different CEOs, bankers asked why then Ananthasubramanian has been singled out.Bankers said the CBI’s reasoning that Ananthasubramanian failed to implement the Reserve Bank of India’s (RBI) direction to link PNB’s information systems and SWIFT is not sufficient ground to charge one CEO, because other lenders had also failed to comply with the directive. SWIFT is a system lenders use to conduct international transactions.With such a charge sheet, the CBI has almost accorded to itself the role of the banking regulator, the RBI, when it doesn’t have sufficient evidence of mala fide intent to charge Ananthasubramanian, said bankers who did not want to be identified.“The biggest question here is since when has negligence, or violation of an RBI circular, become a criminal offence. It is the banking regulator’s domain to penalise banks for the violation of a circular,” said Hemindra Hazari, independent analyst. “Second, many of the other banks had not implemented it. So, the question is why she was singled out?” he added.She was chosen in 2013 by the then ruling party (the Congress) to head Bharatiya Mahila Bank, an initiative aimed at instilling confidence among women to avail bank financing in the aftermath of the Nirbhaya rape case that shocked the nation. Bharatiya Mahila Bank later was merged with State Bank of India (SBI) within a couple of years of its operations after the BJP government came into power. 64378547 A fortnight ago, the CBI filed a charge sheet naming two executive directors, KV Brahmaji Rao and Sanjiv Sharan, general manager Nehal Ahad, and some junior officials such as Gokulnath Shetty, Manoj Kharat and Bechu Tiwari from the banking fraternity. Others named in the charge sheet are Nishal Modi, who is Nirav Modi’s brother, and Subhash Parab, an executive working in Nirav Modi’s company.Nirav Modi and Mehul Choksi were issued Letters of Undertaking (LoU) by two mid-level staff at the bank. These LoUs were used to borrow from overseas branches of other Indian banks. Subsequently, it was found that these LoUs were issued without any collateral from Modi and Choksi, and that the bank could not trace them for years since its software was not linked to SWIFT.The charge sheet said that all four — Usha, Rao, Sharan and Ahad — “by omitting to take any precautions or preventive steps to prevent the fraud perpetrated by firms controlled by Nirav Modi… thereby committed misconduct in conspiracy with accused persons”.In August 2016, the RBI had warned banks that they must keep a watch on the transactions made through SWIFT, adding that a similar instance of fraudulent Letter of Comfort had come to light. The RBI’s instructions followed a cyber attack on Union Bank of India in July 2016, wherein the hacker attempted to transfer $170 million from Union Bank of India to Citibank using a malware attached to SWIFT. In this context, the CBI has said in the charge sheet that “Usha Ananthasubramanian did not take any meaningful corrective measures in her capacity as the executive head of the bank, and had unauthorisedly delegated the RBI guidelines work to her subordinates without any follow-up action taken report, thereby facilitating the accused in continuance of fraud”. Bankers also said that PNB was not the lone bank that had its system and SWIFT independent of each other: Several banks, including State Bank of India, Oriental Bank of India or Dena Bank, operated on similar lines. But unlike PNB, they have been lucky not to have witnessed a fraud by their staff.Although the scam came to light in February this year, the unscrupulous activity has been going on for years. The first LoU was issued in March 2011 when the bank was headed by KR Kamath, who completed his five-year term in October 2014. Incidentally, neither the names of her predecessor KR Kamath, nor that of her successor Sunil Mehta, feature in the charge sheet. At least four current PSU bank CEOs and three former CEOs that ET got in touch with were surprised by the inclusion of her name, although none was prepared to speak on record. The Indian Banks’ Association, the lobby group of the industry, is not keen on taking up the issue with the government or the investigative agency either. The fraudulent operations concerned just one branch, the Brady House outlet in downtown Mumbai.The probe lens is also on Gokulnath Shetty, a deputy manager in the branch, who occupied the position for seven years from April 2010 before retiring in May 2017.Bankers say that this is uniform practice across the industry where banks relied on the Infosys’ Finacle software product for their so-called core banking solution. In none of the banks, the two were linked. “It is disappointing because we pay millions every year to Infosys as maintenance charges,” said a bank chief who did not want to be identified. Infosys did not respond to an e-mail sent by ET.
from The Economic Times https://ift.tt/2IVTKsv
from The Economic Times https://ift.tt/2IVTKsv
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