Where are the promised reforms ?

Power Politics Bureau

After known f r a u d s t e r s Vijay Mallya and Lalit Modi, the country is caught in yet another massive banking fraud by billionaire jewellery designer Nirav Modi. The question here is not one of starting year (2011) of the scam or the colour of government in the saddle –– the Congress-led UPA or the BJP-led NDA.
What is a matter of concern for the people is the leaky banking system and the quality of governance which help fraudsters and not loan-ridden suicideprone farmers, poor account holders in public sector banks whose small deposits shrink regularly since they cannot maintain a minimum balance. This is not the India we had bargained for.

After known fraudsters Vijay Mallya and Lalit Modi, the country is caught in yet another massive banking fraud by billionaire jewellery designer Nirav Modi.

Ravi Shankar Prasad Ten years of the UPA establishment (2004 to mid-2014) was scam-ridden even though it had an honest economist Prime Minister in Manmohan Singh at the helm. The scams during that period were the main reason for the Congress to lose power at the hustings.
In place of the Congress, landed on the nation's centrestage of power the saffron party's Narendrabhai Modi. During his hurricane poll campaign, he promised to conduct himself as "chowkidar" of the national treasury, initiate reforms and install a transparent and accountable system of good governance. It is a different matter that the country saw the vanishing tricks of the scamsters – Vijay Mallya, Lalit Modi and Nirav Modi ––during the past four years of "chowkidari" of Prime Minister Modi!

Public sector banks in India have lost at least Rs 227.43 billion (Rs 22,743 crore) because of fraudulent banking operations between 2012 and 2016, according to an IIM-Bangalore study. Electronics and Information technology minister Ravi Shankar Prasad gave this information to Parliament, citing Reserve Bank of India (RBI) data.

The honourable minister has said there have been over 25,600 cases of banking fraud, worth Rs. 1.79 billion up to December 21 last year. According to the data, released by the apex bank for the first nine months of FY 17, approximately 455 cases of fraud tansactions, each of Rs 1,00,000 or above, were detected at ICICI Bank: 429 at State Bank of India, 244 at Standard Chartered Bank and 237 at HDFC Bank.

Between April and December 2016, over 3,500 cases of fraudulent transactions were reported involving Rs 177.50 billion, which were facilitated by 450 private and public sector employees and the vulnerable banking system.

The latest scam "bombshell" has hit the state-run Punjab National Bank's Brady House branch in Mumbai where Nirav Modi and his associates allegedly

indulged in "fraudulent and unauthorized" transactions to the tune of Rs 11,450 crore in connivance with some members of the PNP staff. The Nirav Modi group reportedly managed to get at least 150 Letter of Undertakings (LoUs) fraudulently which enabled them to defraud the bank. The LoUs were encashed overseas by them from different banks. Union Bank of India, Allahabad Bank and Axis Bank are said to have given them loans based on PNB's LoUs.

The value of fraudulent transactions works out more than eight times PNB's annual net profit of Rs 1,324 crore during 2016-17. Nirav Modi, incidently, figured in Forbes India's Richest People List of 2016, with a net worth of $ 1.74 billion.

Notwithstanding earlier alarm signals from a whistle blower, the PNB's Brady House branch discovered irregularities in issue of letters of undertaking (LoUs) only in mid-January this year. PNB has Rs 1,700 crore loan exposure to Nirav Modi's tainted companies in addition to liabilities up to Rs 11,400 crore.

It is worth noting that LoU operationally works out to be a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. According to a report, "foreign branches of these banks which have dealings with outlets of a jewellery company are said to have taken significant exposures". All this was carried out in connivance with PNB officials. We are yet to fully know all the facts and the range and dimensions of the scam operation. Central agencies are on the job.
True, the pile of bad loans is a legacy of the UPA government. It is also a fact that Prime Minister Modi's government had promised at the start of its term in May 2014 that a clean-up of bank balance sheets of state-owned

Nirav Modi at the opening of their Hong Kong boutique. banks would be one of its primary challenges. Even the 2015-16 Economic Survey had spelt out the road ahead. Still, nothing much has been done to improve the banking system and initiate the process of promised governance reforms. There are obvious supervisory failures both at the levels of individual banks and the banking sector regulator, RBI.
The scam raises a number of questions on the operative system of governing public sector banks.

Gokulnath Shetty First, LoUs for diamond trade are issued for 90 days. How come the bank staff issued 365 day LoUs? This shows how rules are flouted by the banking staff for the rich and the mighty who know the art of managing key persons within and beyond. No wonder, the richest one per cent of Indians own 53 per cent of the country's wealth.
Second, how come the PNB's internal audits and RBI inspections failed to notice irregularities?

Mehul Choksi Third, at the operative desk, why was PNB's deputy manager Gokulnath Shetty allowed to remain on the same desk for years, flouting the norms of rotating people every few months? Shetty allegedly used his access to the Swift messaging system used by banks for overseas transactions to authenticate guarantees given on LoUs without any sanctions. Based on such authentications, overseas branches of several Indian banks gave forex credit. PNB is now denying liability, claiming that these are fraudulent LoUs. My point is: such things cannot happen without the power strings of some invisible hands, both inside and outside of PNB.

It is said that power flows from money-bags. And money-bags flow from power. To whom can the common man turn when money and power work in tandem? A grab mentality could be seen everywhere.

Four, like Vijay Mallya earlier, how come Nirav and his kin managed to leave the country for their foreign destinations in the first week of January? This cannot happen without the help of some government officials. Equally intriguing is that Nirav could manage to get into the businessmen's group photograph with Prime Minister Modi at Davos.
He was surely not part of the official Indian delegation. Still, how could he manage to slip in the group photograph?
Five, the people have the right to ask as to why various ministries and the PMO repeatedly overlooked complaints of wrong-doings against Nirav and his partner Mehul Choksi filed by a whistle-blower? Could this be because of the Prime Minister's preoccupation with foreign trips to project the Shining India image for the flow of foreign investments for his various schemes, including Make-in-India ? It is a pity that in the Prime Minister's lopsided priorities, some of the burning domestic issues and problems facing the country have either been neglected or got sidelined. With one year to go for the next general election, the Modi government has now woken up to address itself to farmers' hackbreaking problems and inject some life in the economy and the health sector. But one year is too short a period to make India shine and create promised jobs for millions of the unemployed.
As for Nirav Modi's affairs, law has moved in swiftly, though we cannot be sure of the net result since there are visible and invisible wheels within wheels in loose ends of the system. One cannot be sure which wheel is operating at whose behest. Incidentally, Nirave Modi has a brother Neeshal Modi who is also a partner in his diamond business. Last year he married Ambani brothers' sister Deepti

Salgaonkar's daughter Isheta. The rest is all a matter of guess. It is said that power flows from money-bags. And moneybags flow from power. To whom can the common man turn when money and power work in tandem? A grab mentality could be seen everywhere.
Those who are a part of the system exploit it, and virtually become insensitive to the sufferings of the less privileged. Indeed, what is disquieting it that scams, frauds and corrupt practices in the system indulge in by the rich and the powerful has begun to hit the common man badly.

On the face of it, the situation seems hopeless. But all is not lost as yet. All that is required is to build up public pressure through free flow of information. The current air of secrecy has to end. Secretiveness is the antithesis of democracy. In India, the ruling class has made a virtue of it.
It is imperative that the sluice gates of misinformation are identified and closed, whether they are operated by state agencies or by non-official agencies.
I wish to reiterate that less of secrecy and more of openness are basic ingredients for building a transparent and accountable system. Let there be fair play and fairness in the system. This alone can help build the confidence of common people in the system.



		EDITOR'S MAIL FROM THE EDITOR Economic Scene Farmers' community Rural India Tribal Community Education Need to focus on Higher Education Frontiers of science PNB Scam Law and order Growing inequality Job creation Sakala Syndrome Environment Sports management The Power of Yoga Art of living US STRATEGY DATELINE BEIJING SIGNS OF THE TIMES Issue:Mar' 2018 Subscribe Now	PNB Scam Where are the promised reforms ? Power Politics Bureau After known f r a u d s t e r s Vijay Mallya and Lalit Modi, the country is caught in yet another massive banking fraud by billionaire jewellery designer Nirav Modi. The question here is not one of starting year (2011) of the scam or the colour of government in the saddle –– the Congress-led UPA or the BJP-led NDA. What is a matter of concern for the people is the leaky banking system and the quality of governance which help fraudsters and not loan-ridden suicideprone farmers, poor account holders in public sector banks whose small deposits shrink regularly since they cannot maintain a minimum balance. This is not the India we had bargained for. After known fraudsters Vijay Mallya and Lalit Modi, the country is caught in yet another massive banking fraud by billionaire jewellery designer Nirav Modi. Ravi Shankar Prasad Ten years of the UPA establishment (2004 to mid-2014) was scam-ridden even though it had an honest economist Prime Minister in Manmohan Singh at the helm. The scams during that period were the main reason for the Congress to lose power at the hustings. In place of the Congress, landed on the nation's centrestage of power the saffron party's Narendrabhai Modi. During his hurricane poll campaign, he promised to conduct himself as "chowkidar" of the national treasury, initiate reforms and install a transparent and accountable system of good governance. It is a different matter that the country saw the vanishing tricks of the scamsters – Vijay Mallya, Lalit Modi and Nirav Modi ––during the past four years of "chowkidari" of Prime Minister Modi! Public sector banks in India have lost at least Rs 227.43 billion (Rs 22,743 crore) because of fraudulent banking operations between 2012 and 2016, according to an IIM-Bangalore study. Electronics and Information technology minister Ravi Shankar Prasad gave this information to Parliament, citing Reserve Bank of India (RBI) data. The honourable minister has said there have been over 25,600 cases of banking fraud, worth Rs. 1.79 billion up to December 21 last year. According to the data, released by the apex bank for the first nine months of FY 17, approximately 455 cases of fraud tansactions, each of Rs 1,00,000 or above, were detected at ICICI Bank: 429 at State Bank of India, 244 at Standard Chartered Bank and 237 at HDFC Bank. Between April and December 2016, over 3,500 cases of fraudulent transactions were reported involving Rs 177.50 billion, which were facilitated by 450 private and public sector employees and the vulnerable banking system. The latest scam "bombshell" has hit the state-run Punjab National Bank's Brady House branch in Mumbai where Nirav Modi and his associates allegedly The honourable minister has said there have been over 25,600 cases of banking fraud, worth Rs. 1.79 billion up to December 21 last year. According to the data, released by the apex bank for the first nine months of FY 17, approximately 455 cases of fraud tansactions, each of Rs 1,00,000 or above, were detected at ICICI Bank: 429 at State Bank of India, 244 at Standard Chartered Bank and 237 at HDFC Bank. indulged in "fraudulent and unauthorized" transactions to the tune of Rs 11,450 crore in connivance with some members of the PNP staff. The Nirav Modi group reportedly managed to get at least 150 Letter of Undertakings (LoUs) fraudulently which enabled them to defraud the bank. The LoUs were encashed overseas by them from different banks. Union Bank of India, Allahabad Bank and Axis Bank are said to have given them loans based on PNB's LoUs. The value of fraudulent transactions works out more than eight times PNB's annual net profit of Rs 1,324 crore during 2016-17. Nirav Modi, incidently, figured in Forbes India's Richest People List of 2016, with a net worth of $ 1.74 billion. Notwithstanding earlier alarm signals from a whistle blower, the PNB's Brady House branch discovered irregularities in issue of letters of undertaking (LoUs) only in mid-January this year. PNB has Rs 1,700 crore loan exposure to Nirav Modi's tainted companies in addition to liabilities up to Rs 11,400 crore. It is worth noting that LoU operationally works out to be a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. According to a report, "foreign branches of these banks which have dealings with outlets of a jewellery company are said to have taken significant exposures". All this was carried out in connivance with PNB officials. We are yet to fully know all the facts and the range and dimensions of the scam operation. Central agencies are on the job. True, the pile of bad loans is a legacy of the UPA government. It is also a fact that Prime Minister Modi's government had promised at the start of its term in May 2014 that a clean-up of bank balance sheets of state-owned Nirav Modi at the opening of their Hong Kong boutique. banks would be one of its primary challenges. Even the 2015-16 Economic Survey had spelt out the road ahead. Still, nothing much has been done to improve the banking system and initiate the process of promised governance reforms. There are obvious supervisory failures both at the levels of individual banks and the banking sector regulator, RBI. The scam raises a number of questions on the operative system of governing public sector banks. Gokulnath Shetty First, LoUs for diamond trade are issued for 90 days. How come the bank staff issued 365 day LoUs? This shows how rules are flouted by the banking staff for the rich and the mighty who know the art of managing key persons within and beyond. No wonder, the richest one per cent of Indians own 53 per cent of the country's wealth. Second, how come the PNB's internal audits and RBI inspections failed to notice irregularities? Mehul Choksi Third, at the operative desk, why was PNB's deputy manager Gokulnath Shetty allowed to remain on the same desk for years, flouting the norms of rotating people every few months? Shetty allegedly used his access to the Swift messaging system used by banks for overseas transactions to authenticate guarantees given on LoUs without any sanctions. Based on such authentications, overseas branches of several Indian banks gave forex credit. PNB is now denying liability, claiming that these are fraudulent LoUs. My point is: such things cannot happen without the power strings of some invisible hands, both inside and outside of PNB. It is said that power flows from money-bags. And money-bags flow from power. To whom can the common man turn when money and power work in tandem? A grab mentality could be seen everywhere. Four, like Vijay Mallya earlier, how come Nirav and his kin managed to leave the country for their foreign destinations in the first week of January? This cannot happen without the help of some government officials. Equally intriguing is that Nirav could manage to get into the businessmen's group photograph with Prime Minister Modi at Davos. He was surely not part of the official Indian delegation. Still, how could he manage to slip in the group photograph? Five, the people have the right to ask as to why various ministries and the PMO repeatedly overlooked complaints of wrong-doings against Nirav and his partner Mehul Choksi filed by a whistle-blower? Could this be because of the Prime Minister's preoccupation with foreign trips to project the Shining India image for the flow of foreign investments for his various schemes, including Make-in-India ? It is a pity that in the Prime Minister's lopsided priorities, some of the burning domestic issues and problems facing the country have either been neglected or got sidelined. With one year to go for the next general election, the Modi government has now woken up to address itself to farmers' hackbreaking problems and inject some life in the economy and the health sector. But one year is too short a period to make India shine and create promised jobs for millions of the unemployed. As for Nirav Modi's affairs, law has moved in swiftly, though we cannot be sure of the net result since there are visible and invisible wheels within wheels in loose ends of the system. One cannot be sure which wheel is operating at whose behest. Incidentally, Nirave Modi has a brother Neeshal Modi who is also a partner in his diamond business. Last year he married Ambani brothers' sister Deepti Salgaonkar's daughter Isheta. The rest is all a matter of guess. It is said that power flows from money-bags. And moneybags flow from power. To whom can the common man turn when money and power work in tandem? A grab mentality could be seen everywhere. Those who are a part of the system exploit it, and virtually become insensitive to the sufferings of the less privileged. Indeed, what is disquieting it that scams, frauds and corrupt practices in the system indulge in by the rich and the powerful has begun to hit the common man badly. On the face of it, the situation seems hopeless. But all is not lost as yet. All that is required is to build up public pressure through free flow of information. The current air of secrecy has to end. Secretiveness is the antithesis of democracy. In India, the ruling class has made a virtue of it. It is imperative that the sluice gates of misinformation are identified and closed, whether they are operated by state agencies or by non-official agencies. I wish to reiterate that less of secrecy and more of openness are basic ingredients for building a transparent and accountable system. Let there be fair play and fairness in the system. This alone can help build the confidence of common people in the system.