New Delhi/Mumbai: The government on Monday initiated the process of removing top bankers, including Allahabad Bank managing director Usha Ananthasubramanian and two executive directors of Punjab National Bank (PNB), charged by the Central Bureau of Investigation (CBI) in the Rs12,636-crore fraud involving jewellers Nirav Modi and Mehul Choksi.

The move is a part of the government’s broader efforts to clean up the banking system.

Along with Anathasubramanian, who was managing director and CEO of PNB from August 2015 to May 2017, two serving executive directors of PNB—Sanjiv Sharan and K.V. Brahmaji Rao—were also named in the chargesheet filed by CBI on Monday. They were charged under section 409 of the Indian Penal Code (IPC) for criminal breach of trust and section 420 of IPC for cheating and Section 13(2) of the Prevention of Corruption Act for causing wrongful losses to the bank and criminal breach of trust to the public.

In all, the chargesheet was filed against 25 entities— 22 individuals and three firms.

Firms controlled by Modi and Choksi are alleged to have conspired with PNB officials for fraudulent issuance of letters of undertaking (LoUs).

“The government has initiated the process of removal of the senior management of banks who have been named in the chargesheet," said Rajiv Kumar, secretary, department of financial services. “In the meantime, the government has instructed the government nominees to move board resolutions seeking divestment of their responsibilities."

While the board of PNB met on Monday and approved the government directors’ resolution to take away the responsibilities of the two executive directors, the board of Allahabad Bank is expected to meet on Tuesday after the government nominee moved to call for an emergency board meeting.

The government had issued a notice to these officials 10 days ago after getting information from the investigation agencies. This is the first step to initiate their removal under section 8 of the Bank Nationalisation Act, Kumar said.

Calls and messages to Ananthasubramanian were not answered. Sharan declined to comment. Messages left for Rao with his office remained unanswered.

To be sure, others who have held top positions in PNB are not off the hook yet. “Ananthasubramanian held the post from 2015-2017. Her role being under the scanner does not mean others, who held the post from 2011-2017, will not be probed," said a person familiar with the development, requesting anonymity.

Anathasubramanian’s name was included in the chargesheet by CBI after it was found that she had overlooked repeated warnings about a similar modus operandi and officials under her sent a false report to RBI about compliance with the central bank circulars issued in the aftermath (of a fraud at Indian Overseas Bank), the person added. “In 2016, a similar fraud at the Indian Overseas Bank in Chandigarh had come to light in which a PNB branch in Dubai was one of the banks to have issued LoUs," he said.

Another official said that the Reserve Bank of India (RBI) had issued a caution notice in 2016 regarding safeguarding of SWIFT operations which was not followed by senior officials of PNB. “Reconciliation of SWIFT was not done with the core banking system despite repeated caution notices. In addition, PNB also misrepresented the factual position to RBI with respect to SWIFT operations," said the second official who did not want to be named.

A second chargesheet involving Mehul Choksi of Gitanjali Gems Ltd will be filed by the end of this week, the public prosecutor said while submitting the chargesheet.

Others named in the 7,500 page chargesheet filed on Monday include Modi, his brother Nishal Modi, their three firms Diamonds R Us, Stellar Diamonds and Solar Exports and seven employees of these three companies. PNB general managers Nehal Ahad and Rajesh Jindal and other mid-level employees including Gokulnath Shetty and Manoj Kharat were also named in the chargesheet.

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