PNB fraud: CVC steps in on vigilance lapses
The Central Vigilance Commission summons senior officials of Punjab National Bank on alleged vigilance lapses which led to a loss of Rs11,400 crore to the lender
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Business News/ Industry / PNB fraud: CVC steps in on vigilance lapses
Mumbai: The Central Vigilance Commission (CVC) is the latest agency to swing into action in one of the largest scams to hit public sector banks. The CVC on Monday morning summoned senior officials of Punjab National Bank (PNB ) on alleged vigilance lapses which led to a loss of Rs11,400 crore to the lender at the hands of Nirav Modi- and Mehul Choksi-owned firms, said two people with direct knowledge of the matter.
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The commission, which looks at preventing corruption at government owned companies, banks and regulatory bodies, has also issued a guidance note to all PSU lenders.
“CVC has issued a guidance note to PSU lenders to transfer senior bank officers who have been at the same post for three years and clerical staff who have been at the same post for five years," said the first person quoted earlier in the story, on the condition of anonymity.
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“The senior officers of PNB are required to submit an inquiry report to the commission on the role of PNB officials in the loss to the lender," said the second person quoted earlier in the story. He too refused to be named.
An email sent to PNB was not answered immediately.
So far the bank has suspended 18 PNB employees, including general manager-level officers in connection with their alleged role in the scam.
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Two former PNB officers have so far been arrested by the Central Bureau of Investigations (CBI) for causing a loss of Rs280 crore to the bank. These officers are alleged to have issued unauthorised and fraudulent letters of undertaking (LoUs) in favour of foreign branches of India-based banks and purported foreign letters of credits (LC) in favour of foreign suppliers of Nirav Modi firms.
Interestingly, PNB was the winner of the Vigilance Excellence officer for 2016-17 for initiating various preventive, participative vigilance and anti-corruption measures. And for adhering to CVC and Reserve Bank of India (RBI) guidelines.
The RBI also said that it was lack of controls that led to the crisis.
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“The fraud in PNB is a case of operational risk arising on account of delinquent behaviour by one or more employees of the bank and failure of internal controls," the RBI said in a release on 16 February. RBI has initiated a supervisory assessment of PNB’s control systems.
Officials of Mumbai’s Brady House branch of PNB, without approvals, issued so-called LoUs (essentially guarantees) that helped Modi’s companies raise credit from other banks. The foreign banks gave the funds to Modi companies on the assurance that PNB will pay up if there is a default.
During custodial interrogation, Manoj Kharat, one of the accused PNB officer, admitted that many bank officials were verifying the LoUs through fraudulent SWIFT messages and this had happened before, CBI said in the remand copy which has been reviewed by Mint.
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