Page 40 - English Tehelka Issue 5 - March 15, 2018

column banking

Banking loots with impunity • unearthing fraud The biggest banking
fraud, involving Nirav Modi, was unearthed
after an internal inquiry by the PNB
as common man cries foul

along with India’s top business and
political leaders promoting ‘Brand
India’, days after Punjab National
News & The government plans to infuse 1 lakh crore into 21 capital-starved Bank had detected the fraud inter-
PSBs this fiscal, of which 5,473 crore is to be injected into PNB.
views In this grim scenario, the ultimate loser is the common taxpayer nally on January 15. Choksi also fled
to a foreign land, apparently for some
Bharat hiteshi medical treatment, well before the
bank decided to make the multi-
t no longer comes as a surprise since the fraud came to light with the crore fraud public. Undoubtedly,
Hiteshi is an that a scam in India is detected share price falling over 20 per cent. the businessman-politician nexus is
independent journalist- only after the accused escapes It may be a coincident or pointer that strong and omnipresent.
turned-author and a the country and leaves for foreign there were similar frauds taking place The growing culture of crony capi-
political commentator. shores. Nirav Modi and Mehul in other banks now that the CBI has talism has encouraged unscrupulous
The views expressed I Choksi are new additions to the also filed an FIR against Rotomac Pens’ businessmen to siphon off huge sums
are his own list of such smart fraudsters. Whether it promoter Vikram Kothari for allegedly from financial institutions, particu-
is the case of Vijay Mallya or Lalit Modi, defaulting on loans worth 3,695 crore to larly public sector banks, with impu-
the pattern seems to be the same. PSU banks. The case was registered on a nity. The daylight robbery is covered
The public sector Punjab National complaint by the Bank of Baroda against up by classifying such bad loans as
Bank has filed an FIR for perhaps the Rotomac Global Private Limited and “non-performing assets” or NPAs. The
largest banking scam of over 11,000 its directors Vikram Kothari, Sadhana Meanwhile, PNB’s top brass has problems in the banking system for burden of such losses are eventually
crore in the country. In a regulatory Kothari and Rahul Kothari. The agency said it has acted promptly, suspend- years. This episode will set off fears borne by nameless taxpayers. Frauds
filing, PNB said it had detected the huge stated in the FIR that Rotomac had ing around 10 officials. The Central of a nexus deeper than imagined. of this scale cannot happen without
fraud in one of its Mumbai branches, cheated a consortium of seven banks by Bureau of Investigation has booked The RBI and investigating agencies the nexus of the rich and the mighty.
putting the quantum of fraudulent trans- siphoning off bank loans of 2,919 crore. one retired and one serving PNB should act speedily to restore trust in But, none is held accountable to
actions at 11,300 crores. Shockingly, it Including interest, the amount comes to employee so far. It is also difficult the banking system. date. Such frauds cannot be brushed
is eight times the bank’s net income of 3,695 crore. Of this, the CBI FIR revealed, to believe that a handful of junior That Nirav Modi and Mehul Choksi under the carpet. The PNB wants us
about 1320 crore. Rotomac owed 754.77 crore to Bank of employees could orchestrate such a fled the country before they could be to believe that the over 11,000 crore
For India’s second largest bank to India, 456.63 crore to Bank of Baroda, massive fraud. The bank’s managing caught suggests a nexus. The latest fraud was committed by some small-
be defrauded is alarming in view of 771.07 crore to Indian Overseas Bank, director has claimed that supervisory corporate offender Nirav was seen in time managers. How could such large
heightened scrutiny of public sector 458.95 crore to United Bank of India lapses are being probed, and the En- the World Economic Forum at Davos transactions take place bypassing the
banks’ operations in the last few years. (UBI), 330.68 crore to Allahabad Bank, forcement Directorate has initiated surveillance system?
The Reserve Bank of India and the 49.82 crore to Bank of Maharashtra, a money laundering case against the
bank’s audit committees and boards also and 97.47 crore to the Oriental Bank of main accused, billionaire-jeweller Assocham for diluting control
conduct routine financial inspections of Commerce (OBC). Nirav Modi, his wife Ami Modi and While the govt In light of the massive scam allegedly
banks’ books. The agency’s FIR added that Rotomac close associates and relatives. It ap- is going for involving jeweller Nirav Modi that
These bodies are meant to keep a had diverted the sanctioned loans to pears that the bank employees who has hit state-run Punjab National
The fact that close vigil on the loans that are on the another ‘fake company’, from where the assisted in the fraud routed large recapitalisation Bank (PNB), industry chamber As-
large transactions verge of default. To add to it, the union money was routed back to Rotomac. transactions for the borrowers by of public sector socham (The Associated Chambers
government, which has often blamed
of Commerce of India) said that the
“The money was utilized for purposes
circumventing the core banking solu-
were routed by bad corporate sector loans on crony other than executing export orders — tion. This flies in the face of the gov- banks, the scrutiny, government should surrender its
circumventing capitalism, recently unveiled a plan credit sanctioned from the export order ernment’s push for a digital payment monitoring majority control of banks, which
to infuse about one lakh crore into 21
received from Singapore for supply of
should be allowed to function like
economy. PNB has sought to blame
the core banking capital-starved public sector banks this wheat was diverted to another company overseas branches of other banks for and disciplined private sector lenders.
“The PNB’s fraudulent transac-
solution flies in fiscal. Of this, 5,473 crore is to be injected called Bargadia Brothers Private Limited not undertaking due diligence before deployment must tions worth 11,300 crore should act
accepting such transactions, but that
into PNB. So even if the actual loss the
(Singapore). Later, the money was remit-
the face of the bank ends up incurring on account of ted to Rotomac’s account by Bargadia. may be too simplistic an explanation. be ensured only as a strong trigger for the govern-
government’s push this fraud is half the stated amount, its In other cases, the money disbursed for An inquiry by the RBI must get to the through greater ment for reducing its stake to less
capital adequacy ratio will be back to the
bottom of the systemic lapses in this
procurement of goods for export was not
than 50 per cent in the banks which
for a digital payment same level before the recapitalization utilized for this purpose and no export affair and fix accountability across private participation should then be allowed to work on
the chain of command. The banker-
order was executed by the company,” the
the lines of private sector lenders
was announced. Its market capitaliza-
economy tion has tanked about 10,000 crore ever CBI official added. borrower nexus has been blamed for in banks with a full sense of accountability to
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