Banking association question RBI on PNB fraud

As the Punjab National Bank-Nirav Modi scam seems to be compounding, banking employees associations have questioned the Reserve Bank of India (RBI) and the four successive governors.

"Apart from PNB, the other organisation who should be answering a lot of questions in this matter is the RBI. Banking supervision and regulation in India must be made legally accountable. What were YV Reddy, D Subbarao, Raghuram Rajan and Urjit Patel doing during this time," asked Vishwas Utagi, convener of Investor Action Forum Charitable Trust Mumbai.

Utagi, who is the former vice president of All India Banking Employees Association (AIBEA), said that it was a case of non-fund business resulting from a bad debt.

"The RBI should be accountable and responsible," he said.

He pointed out that LOUs issued by any bank in India has to be reported to the RBI on a quarterly basis.

"Why is it that when the first LOU was issued way back in 2011, without entering into the CBS, it was ignored by RBI and the PNB top management despite the amounts being so huge," he asked.

On the issue of Society for Worldwide Interbank Financial Telecommunication or SWIFT, he said: "Whenever a SWIFT message is sent it is verified checked and authorised at various checkpoints by personnel in various capacity and hierarchy. Why no one from the forex dept of PNB raised an alarm. This seems more like a top-level collaboration than a branch level fraud."

Whenever such huge amounts are sent through SWIFT, bypassing CBS, it generates daily reports.

"Were the concurrent auditors of PNB sleeping for seven years that they could not go through these daily reports," he said, adding that the problem is deep-rooted.

"When an LOU is issued by one bank to another, the receiving bank sends a letter of confirmation to the issuing branch and it's controlling office like a Regional or Zonal office. Did other banks do so? If so, then why didn't anyone in the PNB controlling office raise an alarm," said Utagi, who is also the general secretary of Maharashtra State Bank Employees Federation.