<p align="justify" class="title">Revelations of fraudulent transactions involving Punjab National Bank and firms linked to billionaire diamantaire Nirav Modi and the Gitanjali Gems group owned by his uncle Mehul Choksi have exposed the systemic failures and vulnerabilities in India's banking system. The fraud is said to be of the order of more than Rs 11,000 crore, perpetrated over a period of seven years. As other banks are also involved and there is still no clarity on the full exposure, through loans or guarantees, the amount at stake might be larger. What has come to light is the use of false letters of undertaking (LoU) as a basis for foreign branches of other Indian banks to transfer funds on behalf of PNB. The recycling of the LoUs ensured that the malpractice continued for a long time. It was centred in a branch of the bank in Mumbai, and some members of the staff have been arrested. The fraud came to light only fortuitously. </p>.<p align="justify" class="bodytext">Public sector banks have already been done in by the bad loans burden and now it comes to light that serious operational problems have also hit them badly. The SWIFT interbank communication system was not monitored in PNB, and probably neither in the other banks. Therefore, bank employees could send messages through this system without them appearing in the core banking system, ensuring that the fraud could go on undetected for years. The bank's top management, the government, which owns it and is responsible for its functioning, and the Reserve Bank of India (RBI) which, as the banking regulator, has oversight functions have all failed in different ways. The role of the banks' board and auditors have come into question. This is not the first time they have all been found inefficient, lacking in vigil or worse, as frauds and scams keep happening.</p>.<p align="justify" class="bodytext">It is difficult to believe that a fraud of such magnitude could happen and continue for years with only a few branch-level employees involved in it. Officials at the senior level are likely involved, even political links cannot be ruled out. A thorough investigation should bring out the true size of the fraud, the way it was committed and its ramifications elsewhere. Those responsible at all levels should be punished and the loopholes plugged so that such frauds do not happen again. Steps should be taken to clean up the entire banking system and restore its health. The NDA government cannot claim that the fraud started during the UPA rule. The scam had a longer run during its tenure. It should explain why it did not take warnings and even specific alerts seriously. </p>
<p align="justify" class="title">Revelations of fraudulent transactions involving Punjab National Bank and firms linked to billionaire diamantaire Nirav Modi and the Gitanjali Gems group owned by his uncle Mehul Choksi have exposed the systemic failures and vulnerabilities in India's banking system. The fraud is said to be of the order of more than Rs 11,000 crore, perpetrated over a period of seven years. As other banks are also involved and there is still no clarity on the full exposure, through loans or guarantees, the amount at stake might be larger. What has come to light is the use of false letters of undertaking (LoU) as a basis for foreign branches of other Indian banks to transfer funds on behalf of PNB. The recycling of the LoUs ensured that the malpractice continued for a long time. It was centred in a branch of the bank in Mumbai, and some members of the staff have been arrested. The fraud came to light only fortuitously. </p>.<p align="justify" class="bodytext">Public sector banks have already been done in by the bad loans burden and now it comes to light that serious operational problems have also hit them badly. The SWIFT interbank communication system was not monitored in PNB, and probably neither in the other banks. Therefore, bank employees could send messages through this system without them appearing in the core banking system, ensuring that the fraud could go on undetected for years. The bank's top management, the government, which owns it and is responsible for its functioning, and the Reserve Bank of India (RBI) which, as the banking regulator, has oversight functions have all failed in different ways. The role of the banks' board and auditors have come into question. This is not the first time they have all been found inefficient, lacking in vigil or worse, as frauds and scams keep happening.</p>.<p align="justify" class="bodytext">It is difficult to believe that a fraud of such magnitude could happen and continue for years with only a few branch-level employees involved in it. Officials at the senior level are likely involved, even political links cannot be ruled out. A thorough investigation should bring out the true size of the fraud, the way it was committed and its ramifications elsewhere. Those responsible at all levels should be punished and the loopholes plugged so that such frauds do not happen again. Steps should be taken to clean up the entire banking system and restore its health. The NDA government cannot claim that the fraud started during the UPA rule. The scam had a longer run during its tenure. It should explain why it did not take warnings and even specific alerts seriously. </p>
