Jaitley blames RBI, auditors for scam

Breaking his silence for the first time in the Rs 11,400 crore Punjab National Bank loan fraud, Finance Minister Arun Jaitley on Tuesday held the bank management, auditors and the Reserve Bank of India responsible for the scam allegedly perpetrated by jeweller Nirav Modi and his group of companies.

"When authority is given to the management then you are expected to utilize authority effectively and in the right manner and therefore the question for management is if they were found lacking, on the face of it seems they were," Jaitley said t a public function here.

He also questioned internal and external auditors and the RBI as supervisors.   "What were auditors doing? If both internal and external auditors have looked the other way and failed to detect then I think the fate of chartered account profession is at stake," he said.

Jaitley said the supervisors needed to introspect what kind of new mechanism should be put in place to find those cheating banks. He said unethical behaviour of borrowers is posing a new challenge to the banking industry and eroding the faith of commoners in it.

"Entire banking system is based on the trust of people, it is raised with monies heavily paid by the tax payers," Jaitley said adding, therefore his government will chase the defaulter till the "last mile".

"Stray cases show lack of ethics today. It is incumbent on us as a state to chase those people to the last point so that the society is not cheated. These stray incidents impinge on banks' ability to lend," he said.

He reminded the bankers about Prime Minister Narendra Modi's commitment after coming to power in 2014 that his government would not interfere with the autonomy of the banks and make no calls to bankers about any specific individual cases.

Soon after Jaitley's comments, the RBI said that it had confidentially cautioned banks of possible misuse of SWIFT infrastructure at least thrice since August 2016.

"In the wake of SWIFT-related fraud involving significant amount, reported recently by Punjab National Bank, the RBI has today reiterated its confidential instructions and mandated the banks to implement, within the stipulated deadlines, the prescribed measures for strengthening the SWIFT operating environment in banks," RBI said in a statement.