Dinesh Kamath's Editorial 'The culprits in PNB fraud case should be punished' that was published in Newsband

The culprits in PNB fraud case should be punished

The ₹11,500 crore fraud at Punjab National Bank is become a big news. The fraud seems to have happened due to the breakdown in internal control mechanisms in the supervisory failure at the banks.

In the case of the Punjab National Bank fraud, letters of undertaking were issued bypassing the bank’s reporting system; the three-tier audit failed to detect the malfeasance.

Rather than routinely reiterate the importance of strengthening corporate governance in public sector banks and promising to infuse greater professionalism, transparency and accountability, it is time the Centre, the major shareholder in these institutions, takes serious steps to translate this intent into action.

There is urgent need to empower bank managements and secure their independence from political interference while enforcing strict accountability for lapses. To restore the depositor’s faith in the banking system, the government, the RBI and the judiciary must ensure that prompt and salutary action is taken.

The Centre opposed a PIL seeking investigation to be launched against the “top management” of the Punjab National Bank (PNB) and to deport diamond merchant Nirav Modi, who is at the centre of an alleged ₹11,000 crore banking loan fraud, in two months.

Chief Justice Misra said the court would want to know in detail as to why the government was opposing this PIL. The issue was of utmost urgency as a “few influential and connected businessmen have decamped with thousands of crores of public money”

The “common factor” found among those like Lalit Modi, Vijay Mallya and Nirav Modi was that they all had seemed “very close to the power corridor.”

The CBI has arrested a general manager-rank officer of the Punjab National Bank posted at the bank’s head office in New Delhi in connection with the alleged ₹11,400-crore fraud involving billionaire jewellers Nirav Modi and his uncle Mehul Choksi,

Bankers were found lacking in being able to check delinquents, says the Finance Minister.  Arun Jaitley squarely laid the blame on the country’s bankers and auditors, observing that they had both abdicated their responsibilities. The Finance Minister also took financial auditors to task, suggesting that the regulatory body for chartered accountants should introspect on what possible action could be taken in the wake of the fraud.

The Institute of Chartered Accountants of India last week said it would review the fraud to probe whether there were lapses on the part of auditors and has sought information from investigation agencies as well as from the markets regulator SEBI.

Jaitley is absolutely right when he says that these kinds of developments have a cost to the country and to the tax payers.