Govt will chase down cheats, says Jaitley

NEWDELHI: Finance minister Arun Jaitley broke his silence on Tuesday, delivering a stinging rebuke to the auditors and the management of PNB for their failure to detect the ~11,400-crore fraud.

Further, in a veiled reference to the RBI, Jaitley added, “Supervisory agencies need to assess as to what new system has to be put in place to detect irregularities... (they) should ensure the stray cases are nipped in the bud and they are never repeated.” Jaitley was speaking at the 41st Annual Meeting of Association of Development Financial Institutions In Asia and the Pacific.

NEWDELHI: Finance minister Arun Jaitley broke his silence on Tuesday, delivering a stinging rebuke to the auditors and the management of Punjab National Bank (PNB) for their failure to detect the ~11,400-crore fraud.

Further, in a veiled reference to the Reserve Bank of India (RBI), Jaitley added, “Supervisory agencies need to assess as to what new system has to be put in place to detect irregularities... (they) should ensure the stray cases are nipped in the bud and they are never repeated.”

Jaitley was speaking at the 41st Annual Meeting of Association of Development Financial Institutions In Asia and the Pacific.

Coincidentally, around the same time, the central bank announced the setting up of a panel under the chairmanship of YH Malegam, a former member of the central board of directors of RBI, to study rising cases of frauds in banks and set out a blueprint to curb them.

RBI, a subject of recent criticism in some quarters, also defended itself claiming that it had warned banks of possible misuse of SWIFT system.

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.

Earlier Jaitley reiterated the government’s commitment to pursue unethical businessmen who have cheated the banks till its last ‘legitimate capacity’ and till the ‘last possible conclusion’.

This is the first official reaction of the finance minister to the fraud detected at Punjab National Bank involving jeweller Nirav Modi and Mehul Choksi of Gitan-investigating jali group. Jaitley said that the taxpayers have invested heavily in the banking system. At the same time, in line with the commitment made by Prime Minister Narendra Modi at the Gyan Sangam, the government no longer interfered in the commercial decision making process of the banks. “(We have told you) we want you to be autonomous, none of us are going to call you up, and therefore take your own decisions. When authority is given to the managements you are expected to utilise that authority effectively and in a right manner,” Jaitley said. “Therefore, the question for the management itself is were they found lacking. And on the face of it, the answer seems yes they were. You are found lacking when you are unable to check who amongst them were delinquent,” Jaitley said.

Investigation agencies are employees of PNB for colluding with the accused. According to the modus operandi, PNB employees helped issue letters of understanding to the firms without recording them in the bank’s books. These LOUs were then used to borrow money from international branches of other banks. Pointing out the failure of the auditors to detect the scam, Jaitley said, “What were the auditors doing? Both internal and external auditors really have looked the other way or failed to detect,” he said, adding that the profession of chartered accountants should start introspecting and take corrective steps. He also pointed out that these events pose a fresh setback to the banking system which was in the middle of resolving it’s bad debt problem through the insolvency and bankruptcy code and the recapitalization of banks.