Jaitley breaks silence, says, will chase PNB cheaters till the end

Source: The Hitavada      Date: 21 Feb 2018 08:29:30


 

NEW DELHI,

Jaitley questioned the ethics of some businesses in the country and asked as to why the bank’s internal and external auditors could not detect the fraud which had been going on for 7 long years

BREAKING his silence over the Rs 11,400 crore fraud at India’s second-biggest bank, PNB, Finance Minister Arun Jaitley on Tuesday said the state will chase down cheaters to the end even as he took the management of the lender to task for its failure to check the delinquents.


Without naming either the alleged kingpin of the fraud, billionaire jeweller Nirav Modi, or Punjab National Bank, Jaitley questioned the ethics of some businesses in the country and asked as to why the bank’s internal and external auditors could not detect the fraud which had been going on for 7 long years.


“It is incumbent on us as a state, till the last legitimate capacity of the state, to chase these people (fraudsters) to the last possible conclusion to make sure the country is not cheated,” he said addressing the annual meeting of Association of Development Financial Institutions in Asia & Pacific (ADFIAP) here.


Modi, whose diamond creations have draped Hollywood stars such as Kate Winslet and Dakota Johnson, and firms linked to him are alleged to have acquired fraudulent letters of undertaking (LoUs) from one PNB branch in Mumbai between 2011 and 2017 to obtain loans from Indian banks overseas. Investigative agencies have raided Modi’s properties and arrested bank employees.


Jaitley said the Government had been step by step addressing issues like high-level of bad debts and need for more capital, but the effort has been put to challenge with the unravelling of the fraud. He reminded the public sector banks that Prime Minister Narendra Modi gave managements the autonomy they needed with none from the Government calling. “When authority is given to the managements you are expected to utilise that authority effectively and in a right manner. Therefore the question for the management itself is were they found lacking? And on the face of it the answer seems yes they were,” he said.


The lenders, he said, were “unable to check who amongst them were delinquent”. He went on to ask what the auditors were doing. “Both internal and external auditors really have looked the other way or failed to detect,” he said.


Chartered accountants and those who control the discipline, should start introspection and “say what legitimate actions are to be taken”, he said. “And also there is an important challenge where the supervisory agencies are now to introspect as what are the additional mechanisms they have to put in place to ensure that stray cases don’t become a pattern again,” he said. “And stray cases are nipped in the bud and an example be made out of people that these bad examples itself are never to be repeated.”


Jaitley said frauds have a cost to the country as well as to the tax payer. “It’s a direct cost and it has an indirect cost that it impinges on development, which impinges on the lending capacity of banks as an institution and therefore impinges upon developmental finance,” he said.


On the banking sector, the Finance Minister said financing for trade and businesses increases when banks have the ability to lend. This ability over the past few years has faced challenges in increased bad debt or NPAs. “One of the direct consequences of this was that the ability of the state to spend and lend even for developmental activities itself will get curtailed,” he said.

After struggling to find solution, the government “finally hit upon the right point through the insolvency and bankruptcy code” that provides for recovery of due amounts through sale of assets of defaulters. Jaitley said initial response to the Code has been encouraging. Also, he said, government is infusing an unprecedented Rs 2.11 lakh crore capital in the banks. “That decision itself as some of my friends in Parliament described also had moral issues because at the end of the day when NPAs become unacceptably high, you expect the taxpayer really to fund what unprincipled sections of the industry have been able to take out,” he said.


Stating that though there is a moral hazard in that kind of solution, he said there was no other option and government had to take that difficult course itself.


ED probing 120 shell cos linked to Modi, Choksi: THE Enforcement Directorate (ED) is probing 120 shell companies allegedly linked to jeweller designer Nirav Modi and Gitanjali Group Chief Mehul Choksi even as Income Tax officials claimed to have found two companies linked to Modi that had received Rs 555 crore from companies in Cyprus, Mauritius and Singapore between 2013 and 2014.


“The agency is investigating 79 shell companies owned by Gitanjali Group chief and 41 companies owned by Modi in India,” an ED official told IANS on condition of anonymity.
He also said that the agency is examining if the money taken from the bank was diverted to these shell companies.


Modi and his uncle Choksi, along with directors of the Modi and Gitanjali groups are under investigation by the Central Bureau of Investigation and the ED for allegedly committing fraud amounting to Rs 11,300 crore against PNB, whose Letters of Undertaking and Foreign Letters of Credit were illegally used to raise and rollover money. Both Modi and Choksi, along with other family members are said to have left the country in early January this year.
The FIR also named two former bank employees said to be directly involved in the fraudulent transactions.