PNB Tarnished Fraud: STOP ROT, SAVE POOR DEPOSITORS…

Sarkaritel
By Sarkaritel February 19, 2018 10:28


PNB Tarnished Fraud

STOP ROT, SAVE POOR DEPOSITORS

By Shivaji Sarkar

The banks are in dire need to save their coffers. The latest Punjab National Bank (PNB) scam of Rs 11.4 thousand crore is a testimony that the poor man’s savings are at the greatest risk.

It is strange that PNB so far has told the CBI of a mere Rs 280 crore fraud. The rest are its assessment that the PNB itself has to account for as transactions have hit several banks. The actual hit may be much more. The fraud as per reports has been happening since 2006 and possibly intensified since 2011. And none knew about it! How come, despite a supposed lead in July 2017, the PNB kept it in wraps!

It is intriguing that while the key players, diamond merchant Nirav Modi, his uncle Mehul Chokshi, Modi’s wife and other family members fled the country in the first week January 2018, the CBI is told about it days later and is able to file an FIR only on January 30. Fifteen days later, the Enforcement Directorate and others seize over Rs 5000 crore assets, including diamonds and fixed deposit papers from Nirav Modi establishments. The assets are illiquid, subject to legal hassles and no succour for PNB and poor depositors.

While the Government puts the blame on PNB, it appears that the letter of understandings (LoU) used for short-term credit on foreign shores for purchases of diamonds abroad had exposure to several other banks, such as overseas branches of Axis Bank, Allahabad Bank and Nostro account of PNB — an account that it holds in foreign currency in another bank. The PNB had honoured the claims until January 5.

Recall, in 1969, banks were nationalised and many later, to save the poor man’s savings. It was hailed as a ‘socialistic’ equaliser as it was professed to prevent the large houses playing with public money. The 1991 liberalisation and severe scams that deprived the banks, UTI and LIC of billions proved that large players conversant with the loopholes always had a free hand.

Additionally, it proved that the money once lost to the public sector or for that matter any bank never comes back. Tardy investigations and prosecutions lead virtually nowhere to recover the money that belongs to the poor and banks fleece them all the way for operating their own accounts. The banks have mastered the art of swindling for the profit of scamsters and may be a large number of bank-related functionaries too.

The Indian society has to learn from its own and western experiences how to move out of transacting through the banks. Let us not forget that the 2007-08 severe meltdown was led by the US and European banks, insurance companies such as the US government’s AIG and other financial institutions. The sub-prime crisis pauperised millions in these rich countries. So it happened during the late 1990s that hit the Southeast Asian tigers.

More less cash has turned out to be bigger route to loot the people who put their money in banks and consider it to be “safe and easy” savings and transaction mode. It is a global crisis and operators are continuously at an advantage. The political players, mostly from the poor and middle class, also need to be aware. The lobbies have got around them to misguide and make them announce schemes which often benefit the scamsters and malign the political system.

The key players in all such global crisis have been the nexus of banks-stock market and master swindlers. They have acted through the routes of power corridors even in the US and Europe said to have strong regulatory mechanism.

It is strange indeed that a government does not mind ruthlessly punishing poor employees, bank cashiers for the smallest unintended mistakes, but lets the big players go scot free. This calls for a probe also into the mis-utilisation of funds by autonomous institutions, government organisations, which have been given liberal grants to never attain the objectives. It has benefitted some top functionaries. This has been happening for decades and includes very innocuously looking bodies that are into education, mass communication and social innovation.

Thus, the PNB scam through alleged fraudulent LoU issued by a PNB official in 2017 summer on which the bank also received fees for three months, is shocking though has surprised none. The practice has continued at least since 2011. While the bank is being blamed for embezzlement, role of its internal auditors and even the RBI’s inspection team is under the scanner.

During all these 12 years Nirav Modi and his uncle’s companies have made large profits in the stock market but the bank’s dues were never paid. It casts its shadow on the share market as well and the linkages must be probed. How has the PNB allowed them to function without getting the principal back?

There is an elaborate web of deception in the Indian banking system. It exposes a weak-risk management practices and glaring oversight lapses. Indian banks apparently have not learnt from the tightening of international practices after the sub-prime 2008 crisis. Instead, Indian banks opened up their coffers and as the Economic Survey 2016-17 says 50 houses were responsible for most bank NPAs, now stated to be 82 per cent of the exposure. Bank recapitalisation of over Rs 1 lakh crore to keep them afloat is a tax on depositors.

The alarm bells are tolling. The biggest bank SBI reported Rs 2416 crore loss a few days back. Many others have either dwindled profits or are in losses. The PNB fraud is a mere symptom. It needs an intense probe across the banks, including so-called private ones and financial institutions to diagnose the malaise.

Most such corporate-linked frauds erode assets, reputation of the country and impoverish the poor who have to suffer in many ways. In the West, the depositors and pension fund insurers lost almost all of it after 2008. In India they are suffering with less interest accruals, higher bank charges and other hardships. Further, online banking has exposed many of them to frauds.

Clearly, the entire banking system requires to be cleansed. The Government must start the process and should not consider PNB as an aberration. A detailed study and remedial procedures are needed. The non-cash transaction for now at least needs to be contained to save the banks and the poor depositors. It is a systemic need and the people be freed of complicated linking with many documents. The aim has to be to stem the banking rot and not punish the poor. All that glitter is not diamond.—INFA

(Copyright, India News & Feature Alliance)

Sarkaritel
By Sarkaritel February 19, 2018 10:28