Explain how scam took place, CVC asks PNB, Finance Ministry; PIL in SC for SIT probe

New Delhi: With the Enforcement Directorate and the CBI widening their probe into the PNB fraud case, the Central Vigilance Commission (CVC) also swung into action in one of the largest scams to hit public sector banks. 

According to ANI, the CVC on Monday summoned senior officials of Punjab National Bank (PNB ) and asked them to explain how an otherwise foolproof system put in place by the bank allowed lapses to occur.

The CVC sought an explanation from the PNB officials on vigilance lapses which led to a loss of Rs 11,400 crore to the lender at the hands of Nirav Modi-and Mehul Choksi-linked firms.

The anti-corruption watchdog asked PNB and the Finance Ministry officials to submit a report on how the scam took place despite monetary regulations being in place. 

The CVC also set a deadline of 10 days for the bank to submit the report.

Earlier the officials of PNB, RBI and the Department of Financial Services gave a 2-hour-long presentation to the CVC about the case and progress made so far. 

CVC also sought the names of officials who were allegedly involved and sought identification of officials who could have taken action and prevented it.

The commission, which looks at preventing corruption at government-owned companies, banks and regulatory bodies, also issued a guideline 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,” a report quoting a source closed to the ongoing probe into PNB scam said.

So far, the PNB has suspended 18 employees, including general manager-level officers in connection with their alleged role in the scam.

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.

“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.

PIL filed in SC for SIT probe into PNB fraud 

Meanwhile, a petition was filed in the Supreme Court demanding a Special Investigation Team (SIT) probe in the ongoing Punjab National Bank (PNB) fraud.

PNB detected the scam last week, wherein noted jewellery designer Nirav Modi acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.

The state-owned lender lodged two financial fraud complaints of Rs. 11400 crore and Rs 280 crore against Nirav Modi, his family members and Mehul Choksi, owner of Gitanjali Gems.

Furthermore, the Central Bureau of Investigation (CBI) sealed the bank's MCB Brady House branch in Mumbai earlier today as part of the ongoing investigation.

Raids are also being carried out presently by the Enforcement Directorate (ED) in a Gitanjali Gems outlet in Pune's Pacific Mall, a Nakshatra showroom in Kolkata's Salt Lake area and other locations.

On a related note, Advocate Vijay Aggarwal who had represented a number of 'high-profile' accused persons in the 2G spectrum case will be the lawyer for accused jeweller Nirav Modi.

(With Agency inputs)