Parliamentary panel seeks report from Finance Ministry over PNB fraud

A parliamentary panel on Thursday questioned finance ministry officials about the alleged $1.77 billion (Rs 113.6 billion) fraud in state-owned Punjab National Bank (PNB) and asked them to submit a report on it.

The Parliamentary Standing Committee on Finance, which met to deliberate upon the demands for grant, asked the ministry officials, including Financial Services Secretary Rajiv Kumar, that how could the taxpayers’ money be used for recapitalising the bank which was not well managed.

“Members expressed their concern over such large-scale fraud in PNB and questioned the recapitalisation process of the state-run banks when they are not well managed and the taxpayers’ money is leaking,” a member, who was present in the meeting, said.

The committee is headed by senior Congress leader Veerappa Moily, and former prime minister Manmohan Singh is also a member.

“The committee has asked the finance ministry officials to submit a report before the panel on this fraud,” another member told PTI.

In what could be the biggest banking fraud in India, PNB had on Wednesday said it detected a Rs 113.6 billion scam in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders. PNB has suspended 10 officers and referred the matter to the CBI for investigation.

While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on LoUs issued by PNB.
 

An LOU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. Foreign bank branches too are under investigation.

In the complaint, PNB had named three diamond firms — Diamonds R Us, Solar Exports and Stellar Diamonds — saying they had approached it on January 16 with a request for buyers’ credit for making payment to overseas suppliers. 

Nobody will be spared: FinMin 

The finance ministry on Thursday said the assets in the Nirav Modi fraud case would be recovered and nobody would be spared.

Talking to reporters on the PNB fraud case, Financial Services Secretary Rajiv Kumar said the bank would make the required provisioning and that it had “sufficient” funds for it.

“Whole lot of assets will be recovered. Nobody will be spared,” Kumar said.

The secretary further said the issue was an “isolated case of a single branch” and all possible action will be taken against the guilty persons.
 

“This is not likely to escalate to other banks. We have already frozen the case,” he said, adding all other banks have been alerted about the case.