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Government will chase down cheaters: Arun Jaitley breaks silence on PNB fraud

Finance Minister Arun Jaitley on Tuesday questioned the ethics of some businesses in the country.

Government will chase down cheaters: Arun Jaitley breaks silence on PNB fraud
File photo (PTI)

NEW DELHI: Breaking his silence over the Rs 11,400 crore fraud at Punjab National Bank, Finance Minister Arun Jaitley on Tuesday said the government will chase down cheaters to the end.

Without naming either the alleged kingpin of the fraud, billionaire jeweller Nirav Modi, or Punjab National Bank, he questioned the ethics of some businesses in the country and asked as to why the bank's internal and external auditors could not detect the fraud which had been going on for 7 long years.

"It is incumbent on us as a state, till the last legitimate capacity of the state, to chase these people (fraudsters) to the last possible conclusion to make sure the country is not cheated," he said addressing the annual meeting of Association of Development Financial Institutions in Asia and Pacific (ADFIAP).

Jaitley added that the government had been step by step addressing issues like high-level of bad debts and need for more capital, but the effort has been put to challenge with the unravelling of the fraud.

He reminded the public sector banks that Prime Minister Narendra Modi gave managements the autonomy they needed with none from the government calling.

"When authority is given to the managements you are expected to utilise that authority effectively and in a right manner. Therefore the question for the management itself is were they found lacking? And on the face of it the answer seems yes they were," the FM said, PTI reported.

The lenders, he said, were "unable to check who amongst them were delinquent". Jaitley went on to ask what the auditors were doing. "Both internal and external auditors really have looked the other way or failed to detect," he said.

Chartered accountants and those who control the discipline, should start introspection and "say what legitimate actions are to be taken", the minister said.

"And also there is an important challenge where the supervisory agencies are now to introspect as what are the additional mechanisms they have to put in place to ensure that stray cases don't become a pattern again. And stray cases are nipped in the bud and an example be made out of people that these bad examples itself are never to be repeated," he said.

Jaitley further said that frauds have a cost to the country as well as to the taxpayer. "It's a direct cost and it has an indirect cost that it impinges on development, which impinges on the lending capacity of banks as an institution and therefore impinges upon developmental finance," he said.

Nirav Modi and firms linked to him are alleged to have acquired fraudulent letters of undertaking (LoUs) from one PNB branch in Mumbai between 2011 and 2017 to obtain loans from Indian banks overseas.

PNB had on February 14, 2018, intimated stock exchange BSE about the "fraudulent and unauthorised" transactions in one of its branches in Mumbai

"The bank has detected some fraudulent and unauthorised transactions in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance," India's second-biggest state-run bank had said in a regulatory filing.

PNB had also cautioned other banks about the modus operandi of the scam.

"It has been reported through a preliminary investigation that the suspected fraud has been carried out by the perpetrators in collusion with the staff of one of our branches in Mumbai," PNB had said in a letter sent to various banks, including those from the private and public sector as also to foreign lenders.

The companies were maintaining only current accounts with the branch and none of the transactions was routed through the Centralised Banking System, it had said.

Meanwhile, Nirav Modi has virtually wrung his arms in the air saying PNB's overzealousness has shut the doors on his ability to clear the dues, which he claimed is much lower than the bank has gone public with.

In a letter he wrote on February 15/16 to the PNB management he pegged the amount his companies owes to the bank under Rs 5,000 crore.

"The erroneously cited liability resulted in a media frenzy which led to immediate search and seizure of operations, and which in turn resulted in Firestar International and Firestar Diamond International effectively ceasing to be going-concerns. This thereby jeopardised our ability to discharge the dues of the group to the banks," Nirav Modi, who left the country along with his family in the first week of January 2018, wrote in the letter, as per PTI.

"In the anxiety to recover your dues immediately, despite my offer (on February 13, a day before the public announcement, and on 15,) your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts," he added.

The letter also refers to the extended discussions between him, and between his representatives and the bank officers and also his emails on February 13 and 15, 2018.

(With PTI inputs)