Last Updated : Feb 24, 2018 03:35 PM IST | Source:

Banking sector this week: New scam at OBC, PNB and Nirav Modi exchange letters and all about the scam

Tremors of such scams seem to have been felt by to other banks as well as top management of several public sector banks have begun conducting reviews

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Punjab National Bank (PNB) and Nirav Modi continued to remain the eye of the country’s biggest banking storm during the entire week.

Sunil Mehta, the CEO and Managing Director of PNB may be a man caught in the midst of this financial storm worth Rs 11,400 crore. But on any normal day, he would much rather prefer spending time with his favourite book -- biography of Swami Paramahansa Yogananda -- than deal with diamonds and diamantaires.

Sunil Mehta: A biker and book lover

Another scam unfolds at Oriental Bank of Commerce

Although the week ended with a new scam unfolding at another public sector lender, this time at Oriental Bank of Commerce. After Nirav Modi and Mehul Choksi, the Central Bureau of Investigation (CBI) has registered a case against a Delhi-based diamond jewellery exporter for an alleged bank loan fraud to the tune of Rs 389.85 crore towards Oriental Bank of Commerce.

Tremors of such scams seem to have been felt by to other banks as well as top management of several public sector banks have begun conducting reviews and taking steps to centralise all processes  including SWIFT to link them to core banking solutions (CBS).

Even as banks are under the lens for compliance, it has emerged that all the 20 public sector banks including, PNB have ‘watchdogs’ missing from their Boards.

Also read: How PSBs fail to learn a lesson from the likes of Modi, Mallya and Mehta

Latest developments on PNB fraud

In some latest developments on the PNB scam, market regulator Securities and Exchanges Board of India – SEBI may declare Gitanjali Gems’ financial services arms as 'not fit' to conduct business.

The Ministry of Corporate Affairs has moved National Company Law Tribunal (NCLT) to attach and freeze properties of Mehul Choksi and Nirav Modi

Nirav Modi’s letter to PNB and other banks had claimed PNB had earned commission on the buyers' credit given to his three firms.

In response, PNB has asked Nirav Modi to come up with an implementable plan for repayment saying it has followed lawful avenues to recover its dues from him.

RBI takes action

In a step forward, the banking regulator Reserve Bank of India (RBI) has asked banks to link SWIFT to core banking solutions before April 30 as part of its efforts to tighten internal controls in banks following the Rs 11,400 crore fraud disclosed on February 14.

PM assures action

Breaking his silence over the big fraud, Prime Minister Narendra Modi said his government will take stringent action against financial irregularities and not tolerate loot of public money.

PNB scam so far

SWIFT and Tripping: How Punjab National Bank's Rs 11,000 cr scam was operated

How the case came to light?

It took a retirement to unearth one of the biggest frauds in the banking sector. The case was unearthed on January 16, after diamond jeweller Nirav Modi’s company sought a fresh loan early last month. By then, the PNB official they had allegedly been working in collusion with, had retired.

Auditors under the ire

The scam has raised glaring concerns on the irregularities and lacunae in Indian auditing and banking systems. PNB has also appointed auditor PwC to conduct an investigation into the alleged fraud.

Just when PNB was hoping to come out of the woods with its improved non-performing asset (NPA) ratio, a fraud of about Rs 11,400 crore is likely to pinch the bank’s financials, capital ratios and ratings in this quarter.
First Published on Feb 24, 2018 03:35 pm
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