A slugfest of accusations and counter-accusations has broken out between the Congress and the BJP over the Rs 12,700 crore fraud detected in Punjab tiol Bank. Using it as a handy stick to beat the government with in Parliament, the Congress has alleged that the scam has occurred under Prime Minister rendra Modi’s watch. The BJP has hit right back, pointing out that the fraud began seven years back when the UPA was very much in power. The CBI FIR mentions that the fraud started in 2011; however, over Rs 3,000 crore worth fake letters of understanding (LoUs) were issued by the bank to the two accused scamsters Nirav Modi and his uncle Mehul Choksi since March 2017. CBI sleuths are grilling PNB officials to find out how the scam could have gone on undetected for so long with the top magement remaining blissfully uware. Only a few middle and junior level bank officials have been caught so far, raising suspicions that the big fish may quietly be slipping away. The Modi-Choksi duo has already fled the country before the scandal broke last month. It looks all so familiar, like Kingfisher boss and Rajya Sabha MP Vijay Mallya blithely jetting off abroad after defrauding several Indian banks of Rs 9,000 crore. Mallya has since then been pouring scorn from his safe perch in UK at Indian efforts to extradite him, while Modi has been spotted living the high life in US, with his lawyers moving Delhi High Court against seizure of his properties. It is now becoming clear that the burden of this massive bank fraud will be borne by long-suffering common taxpayers of this country again for no fault of theirs.
An RTI enquiry by activist Jeetendra Ghatge has meanwhile revealed that in three fincial years from 2015, some 333 cases of high level swindling (over Rs 50 lakh threshold) have been registered with the Economic Offences Wing (EOW) in Mumbai, the country’s fincial capital, involving total Rs 19,668 crore. As many as 184 accused scamsters are absconding. According to Ghadge, such high flying scamsters “have no fear of the law” — they get away with impunity through political connections and by bribing investigating officials. This besides, agencies like EOW and CBI are also battling manpower shortage, particularly expert officers capable of investigating complex fincial frauds. Apart from ponzi schemes and fincial frauds based on get-rich-quick schemes, scamsters are gaming the country’s banking system at will. Citing the gargantuan non-performing assets (NPAs) burden, most banks are wary of advancing modest loans to small entrepreneurs, while ming and shaming small defaulters with gusto. Then how is it that the same banks allow big time fraudsters to clean them out? The way banking rules have been flagrantly violated in such cases, it is clear that such gigantic frauds could not have come about without conniving bank staff. In the PNB fraud case, junior officials issued bank guarantees to foreign branches of Indian banks to provide loans in foreign currency to Modi-Choksi diamond importers. They did this without asking for collateral or making credit appraisal as per bank rules. They also did not enter details of the LOUs in the bank’s interl software, so as to keep the transaction hush-hush. In turn, the Modi-Choksi duo used each new bank guarantee to settle an earlier loan taken through a previous bank guarantee, thereby operating like ponzi scamsters. The latest scam has thus once again exposed the utter lack of monitoring and ‘risk magement’ capacity of banks in the country, particularly PSU banks. Belatedly, the Reserve Bank has now asked banks to mandatorily link their SWIFT software to the Core Banking System (CBS) and closely monitor high-value transactions. Considering the damage done to trade fince activities as a fallout to the PNB scam, this should be an opportune time for lawmakers in Parliament to debate on overhauling PSU bank operations and proposed legislations like Fugitive Economic Offenders (FEO) Bill, 2018 for confiscation of property of proclaimed economic offenders fleeing the country.