Mumbai: The Indian Banks Association (IBA) today met on Saturday to discuss the Rs 11 400-crore scam at Punjab National Bank allegedly caused by the absconding diamond trader Nirav Modi and a clutch of his family-run companies.The meeting was attended by senior officials of public and private sector lenders sources said this evening.Interestingly the meeting earlier scheduled to be held at the IBA headquarters in Cuffe Parade south Mumbai was changed at the last moment to the SBI headquarters at Nariman Point apparently to avoid the media.Among those present were Allahabad Bank managing director and chief executive and also IBA chairperson Usha Ananthasubramanian Bank of India managing director and chief executive Dinabandhu Mohapatra ICICI Bank chief financial officer N S Kannan and IBA deputy chief executive B Rajkumar. The discussion centred around how to recover the money (from those involved in the fraud) said a banker without disclosing the details. State-owned PNB has been rocked by a USD 1.77 billion scam where billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertakings (LoUs) from the Brady House branch in south Mumbai to secure overseas credit from other lenders.The other banks which have or have had exposure to the fraud include State Bank of India (over USD 221 million) Allahabad Bank and Axis Bank among others. Some overseas lenders are also believed to have had exposure to the fraud.Law enforcement agencies are on the lookout for Nirav Modi and his family and also his uncle Mehul Choksi who heads the Gitanjali Group.The ED claims to have recovered over Rs 5 400 crore worth of diamonds and bullion from the raids on Nirav Modi s enterprises since the scam came to light earlier this week.Nirav Modi and his family members left the country in early January and are believed to be in New York. CommentsClose X The enforcement agencies have sought the Interpol help to trace the billionaire jewellery designer and bring him back to the country.The external affairs ministry yesterday suspended with immediate effect the passports of the diamantaire and his business partner Mehul Choksi both prime accused in the scam for a month.
.story-content span .story-content p .story-content div color:#000!important;font-family: open sans Arial!important;font-size:15px!important ALSO READ Stern action needed: Letter to BS on woman delivers baby outside hospital Sad state of affairs: Letter to BS on Padmaavat release controversy Bold reform: Letter to BS on NPA rules may mean short-term pain for banks Letter to BS on Govt hikes duty drawback rates on 102 exports items Stress on profitability: Letter to BS on options to de-stress PSBs span.p-content div id = div-gpt line-height:0;font-size:0 This refers to Rs 114bn scam: Pay up dues to banks for claims against LoUs RBI tells PNB (February 16). PNB has issued Letter of Undertakings (LoUs) and not Letter of Credit or Letter of Guarantee. An LoU does not contain a financial commitment. It is at best a letter of comfort. An LoU does not create a contingent liability to the issuing bank (PNB). It is therefore surprising how RBI can insist that PNB meet its commitments to other banks who extended buyers credit. If other banks relied upon LoUs for extending buyers credit it is their fault. It is altogether a different issue if PNB honoured other banks claims arising from discounted bills. It is a mystery how PNB honoured its commitments even as Nirav Modi s companies did not enjoy fund-based and non-fund based facilities. Did PNB create unsecured overdraft for Modi s companies to honour other banks discounted bills? K V Rao Bengaluru Letters can be mailed faxed or e-mailed to: The Editor Business Standard Nehru House 4 Bahadur Shah Zafar Marg New Delhi 110 002 Fax: (011) 23720201 E-mail: letters@bsmail.in
Written by George Mathew | Published: February 19 2018 4:53 am The Punjab National Bank (PNB) branch where fraudulent transactions were detected. (Express Photo: Ganesh Shirsekar) The alleged fraud was carried out through misuse of Letters of Undertaking or LoUs issued by Punjab National Bank. What are LoUs and how do they work? In trade finance which is the business of imports and exports companies need funds to pay overseas suppliers in foreign currency. When an Indian company approaches its banker for such funding designated officials will approve a credit limit for which an LoU can be issued. Once the LoU essentially an undertaking by a bank to the overseas branches of other Indian banks to meet a liability on behalf of a customer is issued a message regarding the funding is sent from India to the bank abroad using the Society for World Interbank Financial Telecommunication (SWIFT) platform. SWIFT is a secure global financial messaging service used by over 11 000 financial institutions in more than 200 countries. On receiving the SWIFT message the branch (which is mostly of an Indian bank in the case of Indian companies) abroad provides credit against import documents normally for 90 days. (It could be that the LoU-issuing bank does not have operations in a particular foreign country.) Margins on the borrowing depend on the risk profile of the borrower and the company s credit rating and the terms of the credit limits set by the issuing bank. This is essentially a short-term foreign currency loan on which banks charge 60 to 90 basis points over the London Interbank Offered Rate or Libor the international benchmark for pricing loans or lending. Read | Inside the Punjab National Bank fraud: What an LoU is how case may impact the bank This facility is used regularly by companies in the business of gold gems and jewellery. Companies prefer this form of funding also because the costs of raising money overseas are relatively less compared to rupee funding. And for banks this is good business if all goes well. What is the process that is normally followed to issue LoUs and transmit messages by SWIFT? Requests for loans or LoUs for large amounts have to be approved by the senior management. The other part of the story is the transmission of the messages. This is usually a three-layer process that takes place either at the branch or its offices. One bank official is designated as a maker another a verifier and a third is the authoriser. All have different logins and passwords and work independently of each other. Read | In December Nirav Modi s firm was moving to go public raise funds What went wrong in the PNB case? SWIFT transactions are linked to the Core Banking Solution (CBS) of banks which contains transaction histories and other data of all customers and can be accessed by all branches where a customer has an account. SWIFT transactions therefore are automatically recorded and are seen by officials from regional managers to general managers and when the amount is big by the top management. In the PNB case the scamsters allegedly delinked SWIFT from CBS in the case of companies that were linked to Nirav Modi and Mehul Choksi. However LoUs of other companies were routed through the SWIFT-CBS system. This meant that funds were provided to the Modi-Choksi companies without being recorded in the bank s CBS. Also according to the CBI s FIR two officials at the foreign exchange department at PNB s Brady House branch in Mumbai allegedly issued eight LoUs worth Rs 280 crore in February 2017 to Hong Kong branches of Allahabad Bank and Axis Bank without authorisation. Nirav Modi The alleged fraud continued for seven long years without being detected. How? How and how a handful of staffers could game the system is baffling. The investigation should reveal details but it seems reasonable to assume that the fraud could have gone on for so long only with the active collusion of a ring of officials. One of the bankers now under arrest reportedly handled transactions to provide credit to Nirav Modi s firms for seven years in violation of the normal practice of transfers every two or three years. SBI Chairman Rajnish Kumar said We don t keep a person for more than three years at one position. There are certain positions which are very sensitive and we monitor those positions very closely. Banking is a risky business. Again in PNB s case one out of the three persons that banks typically task to transmit SWIFT messages carried out two roles according to investigators. Also several bankers wonder how the delinking of SWIFT from CBS could have been achieved without it being detected by the bank s information technology department. These suggest a possible compromising of the sanctity of passwords or authentication and the breaching of information technology systems. And the fact that at the very beginning the approval for issuance of LoUs whether forged or otherwise for such huge amounts without it being captured in the system or red-flagged indicates a major failure of internal control systems. Vehicles called by ED to transport money jewellery and documents from the Chanakya. (Express photo by Abhinav Saha) OK in the normal course how do the banks that lend to a company on the basis of LoUs get their money back? Banks approach the lender that has issued the LoU because these are commitments made by the issuing bank on behalf of a customer. Many banks receive their funds at the end of the 90-day period after which fresh LoUs may be generated often to keep payments to banks going. The investigation will look at allegedly forged LoUs that seem to have helped the firms secure funding for long. The liability for these LoUs is being contested by PNB but other banks are unanimous that it must honour the undertaking it gave. So do the banks that provide this facility on the basis of an LoU have no responsibility? Bankers say the bank receiving an LoU sends a letter of confirmation to the issuing branch and its controlling offices. It is not clear whether receiving banks such as Axis Bank Allahabad Bank and Union Bank sent such letters. And if they did the question is why no alarm was raised in PNB. It could be that the receiving banks didn t send the confirmation letter. Or it could be that the letters were buried at PNB. The RBI said on Friday that the fraud in PNB was the result of delinquent behaviour by some employees and the failure of internal controls. What are these internal controls? Some have been listed in the answer to the question above on how the fraud went on for so long. Ideally SWIFT messages should have been checked by senior officials in charge of the credit investment or treasury departments that handle the foreign exchange business. Whenever such huge amounts are sent through SWIFT daily reports are generated. All banks including PNB have vigilance departments and fraud management committees. Banks also have internal branch audits and concurrent audits involving external auditors. They also have risk management and audit committees at the Board level to ensure compliance. The failure of all these controls is a serious concern also because PNB had been hurt badly because of lending in the past to Winsome Diamonds which is now listed as one of India s top defaulters. What is the responsibility of the RBI itself? Bankers say all LoUs have to be reported to RBI on a quarterly basis. It is not clear if the regulator s inspection of the bank s books revealed anything earlier. Till a few years ago RBI used to inspect branches of banks but it has now switched more to offsite monitoring. Successive RBI Governors have written to the government about the conflict involved in having a central banker sitting on the Board of a bank that RBI regulates. But the government insists that having a regulatory representative helps with checks and balances. This has led to debates on the accountability of the government which owns many banks. On Friday the RBI said it had already undertaken a supervisory assessment of control systems in PNB and would take appropriate supervisory action. george.mathew@expressindia.com For all the latest Explained News download Indian Express App Tags: Express Explained Nirav Modi Punjab National Bank Kannan RamanathanFeb 19 2018 at 8:56 amQuestion is this all happened during the period of Raghu ram rajan . What did he do to oversee this?(0)(0) Reply Sundar BNFeb 19 2018 at 8:05 amThere s much rotten in the state of PNB. How do we know that they haven t similarly financed JeM or ISI or D aesh or the Indian Mujahideen?(0)(0) Replyblackpower 666Feb 19 2018 at 8:52 amindeed! how can one be sure that FAKENDRANATH under whom this has happened has not been financing JeM (a BJP creation after all!) ISI or D aesh or the Indian Mujahideen?(0)(0) Reply
NEW DELHI: Scam-hit Punjab National Bank has seen nearly 23 per cent jump in the amount which wilful defaulters owe it with loan outstanding of Rs 25 lakh and above in just over eight months ended January. The wilful defaulters who have taken loans over Rs 25 lakh from the bank had a gross outstanding against them of Rs 14 593.16 crore as on January 31 2018 as per PNB data. The bank first started giving out such data from June 2017 when the gross loan outstanding against them was at Rs 11 879.74 crore. The amount has grown over 22.8 per cent in these eight months. The rise in such outstanding is startling especially when the bank has been aggressive for over a year now in recovering bad loans. The 123-year old bank has unearthed Rs 11 400 crore fraud allegedly involving billionaire jeweller Nirav Modi and associate companies. The fraud pertains to issuance of fake Letters of Understanding (LoUs) to companies associated with Modi by errant PNB employees that enabled these companies to raise buyers credit from international branches of other Indian lenders. The list of wilful defaulters with over Rs 25 lakh loan as on January 31 2018 include Rs 747.97 crore against Forever Precious Jewellery & Diamonds; Rs 597.44 crore against Kingfisher Airlines; Rs 410.18 crore against Zoom Developers and Rs 266.17 crore against MBS Jewellers Pvt Ltd among others. PNB CMD Sunil Mehta said last week that the bank would take all the legal action to bring the perpetrators to the books and that it will also honour all its bonafide commitments. PNB has been putting out the list of wilful defaulters since June 2013 which it continued till May 31 2017. Since then it is only listing out those wilful defaulters with outstanding of Rs 25 lakh and above with their names/proprietorship from June last 2017. Bank s net non-performing assets (NPAs) or bad loans fell to Rs 34 076 crore at the end of third quarter ended December of the current fiscal from Rs 34 994 crore at end-December 2016. Gross NPAs were up however at Rs 57 519 crore as on December 31 2017 as against Rs 55 628 crore by the same period of previous fiscal. In terms of ratio the net NPAs fell to 7.55 per cent of the net advances by end of third fiscal 2017-18 from 9.09 per cent in the year ago same quarter. Gross NPAs were 12.11 per cent as against 13.70 per cent. Post the third quarter earnings announcement on February 6 Mehta said he hoped to see good recoveries in bad loans in the last quarter ending March 2018. The bank has about 95 accounts in the NCLT (National Company Law Tribunal) with total exposure of Rs 18 000-19 000 crore. For smaller loans the bank has undertaken a one-time settlement scheme to clean up its books. The recoveries through this scheme have been around Rs 1 800 crore so far in 2017-18.
NEW DELHI: Punjab National Bank will honour commitments arising from the alleged Rs 11 300 crore fraud but any final payout will be based on investigation findings managing director Sunil Mehta said on Thursday. The matter is under investigation. We will see whatsoever our responsibility is and whatsoever the regulator says we will definitely comply he said at a press conference adding that the bank was capable of dealing with the situation. Mehta said jeweller Nirav Modi had made vague offers that are under examination. Nirav Modi has not come out with any concrete plan to repay so far he said. As for provisions Mehta noted that the bank does not have any fund exposure. It is difficult to give any technical number right now. The matter is under investigation he said adding that there was no contingent liability because the letters of undertaking (LOUs) have not been converted into funded transactions so far. We will resolve the issue. We will honour all our bona fide commitments he said noting that PNB kept all stakeholders informed and issued advisories to banks in line with the objective of responsible and responsive banking. When asked specifically if the bank will take on all LoU-related liabilities Mehta said that PNB was already in discussions with the relevant lenders. It will be decided based on the investigation. If the entire onus is on us we ll own the responsibility we are not going back from it. But nobody can be a beneficiary of this he said. Mehta clarified that it was an isolated case. The bank had scanned all its branches and not come across any similar incidents he said. We detected this is in the third week of January. After that we launched investigations and approached CBI (Central Bureau of Investigation) on January 29. FIR (first information report) was lodged on January 30 he said adding that PNB had already conducted a meeting of the lenders consortium because the companies involved have relationships with a number of banks. We have already informed lenders during the consortium meetings they are seized with the situation. They are working on modalities. It will be too premature to say what will be the future legal recourse he said adding the market regulator had also been informed in time. Mehta said PNB had not received any direction from the banking regulator on the investigation process but the bank will comply if RBI gives any direction. PNB is hopeful that it will be able to recover a substantial amount of the money involved and noted that it is trying to protect the financial interest of all lenders. Enforcement Directorate is also confiscating properties and current assets and we are already in the mode of recovery said Mehta.
Written by Deeptiman Tiwary | New Delhi | Updated: February 19 2018 6:37 am Over the past three years PNB that is now in the dock for allegedly allowing rogue employees to game the system to benefit firms controlled by diamantaires Nirav Modi and Mehul Choksi bagged three vigilance excellence awards. Even as Punjab National Bank was being defrauded of thousands of crores allegedly Rs 11 400 crore over seven long years it was winning awards for excellence in banking vigilance. Over the past three years the government-owned bank that is now in the dock for allegedly allowing rogue employees to game the system to benefit firms controlled by diamantaires Nirav Modi and Mehul Choksi bagged three vigilance excellence awards. Two of these awards came in 2017 the year PNB issued 293 LoUs to companies owned by Modi and his family and were given out by Central Vigilance Commissioner (CVC) KV Chowdary. Read | PNB Fraud: Auditor Deloitte rang alarm bells on Nirav Modi two years ago In the second week of March last year PNB s Chief Vigilance Officer S K Nagpal received a Corporate Vigilance Excellence Award from the hands of Chowdary at a Vigilance Conclave organised by the Institute of Public Enterprise (IPE) an MBA institute on campus at Osmania University Hyderabad. Chowdary was the key speaker at the event the eighth of its kind organised by the institute. Towards the end of October 2017 the Central Vigilance Commission had organised a Vigilance Awareness Week in New Delhi where it gave away awards to various PSUs for their anti-corruption work carried out in adherence to guidelines laid down by the Commission and the Reserve Bank of India. According to the Commission s website PNB bagged the Vigilance Excellence Award for Outstanding Achievement in Timely Completion of Disciplinary Proceedings . CVC Chowdary presented the award to Nagpal for completing 92% of the total disciplinary proceedings within the prescribed timelines . The vigilance award given to PNB by IPE Hyderabad. (Source: PNB website) On the Hyderabad award Chowdary told The Indian Express They organise this annual event where 10-12 PSUs participate. I was called there as a speaker. After my speech they requested me to distribute some certificates which I did. PNB and some other PSUs also won some certificates. The institute s management selects winners based on some parameters set by them. On the Commission s own award the CVC said CVC gives awards annually based on various categories of work. PNB was awarded for bringing down departmental proceedings. See if you do well in English you will get good marks. But that won t take you through Hindi as well. Read | Punjab National Bank fraud: How the system was gamed The CVC has summoned the PNB brass on Monday to answer questions on lapses by the bank s employees in connection with the alleged Nirav Modi scam. Chowdary is likely to take stock of where the bank erred in allowing the fraud to pass undetected for years. The Punjab National Bank (PNB) branch where fraudulent transactions were detected. (Express Photo: Ganesh Shirsekar) The PNB website says the bank won the IPE vigilance award in 2014-15 as well for improved handling of complaints institution of whistleblowing system quick disposal of vigilance cases reduction in outstanding vigilance cases pruning down of vigilance cases of more than one year etc . Read | Inside the Punjab National Bank fraud: What an LoU is how case may impact the bank The citation said PNB had taken various preventive/anti-corruption measures apart from steps such as job rotation in LODI list/Agreed list to non-sensitive assignments measures of predictive/corrective vigilance introduction of vigilance audit system introduction of new Risk Based Staff Accountability Policy etc . It noted that the work of the vigilance department had saved the bank over Rs 45 crore and congratulated its then CVO Siva Kumar Gupta. Read | In December Nirav Modi s firm was moving to go public raise funds A senior PNB official said Vigilance awards are given based on overall performance. But in any large organisation there can be a few crooks. This LoU fraud was done by a couple of people in one branch in an organisation of 70 000 employees with 7 000 bank branches. This does not indicate deterioration in the vigilance standards. However I agree that there was a failure of the bank s internal control systems in not detecting the fraud early on. A questionnaire emailed to IPE director R K Mishra did not elicit a response. https://xenforo.com/community/members/kfckk.173188/#about For all the latest India News download Indian Express App Tags: Nirav Modi Punjab National Bank S NityanandaFeb 19 2018 at 9:09 amIn India we have a startling habit of praise for people who have very negative performance to show. Leave alone PNB what about the fulsome praise showered on Ms Swaraj and Ms Raje for services to the nation and their stout defence by the BJP ? In contrast we find that they them selves have admitted to having aided a fugitive LaMo in various ways to make his stay in UK legal and enable him to move around all over the world !! We are full of similar contradictions.(4)(0) Reply Hari BFeb 19 2018 at 8:47 amCertificates are marketing material unless it standards are not adhered to letter and spirit. Today s greedy management forces employees to find short cuts to show results. We should only look for moderate results and strict compliance. Can this happen? I am sure it is possible(2)(0) Reply blackpower 666Feb 19 2018 at 8:44 amin a country where FAKENDARAN ATH is the PM the vigilance officers are obviously modi-modi (Narendr and Nirav) plants. if on were to recall the satyam scandal where a few months before the embezzlement broke out satyam had won awards for corporate governance(10)(4) Reply Satindra Paul SinghFeb 19 2018 at 8:41 amNo loan is granted without guarantee.Sarkari banks are controlled by the govt.Its the govt.who is the actual violator of the rules.(4)(2) Reply Feb 19 2018 at 8:37 amWhen Sharad Pawar can get top civilian award under this regime what is the surprise that PNB got 3 awards!!!(5)(0) Reply Load More Comments
No comments:
Post a Comment