Allahabad Bank CEO named in PNB fraud case
NEW DELHI: The CBI on Monday formally charged Allahabad Bank CEO and MD Usha Ananthasubramanian, who was the CEO of Punjab National Bank during the fraud perpetrated on it by diamond trader Nirav Modi, and 21 others, including Modi himself. The finance ministry said Ananthasubramanian was being relieved of her current position at the state-owned Allahabad Bank following the filing of the charge. In all, CBI charged 22 individuals and three Modi companies in its first charge sheet in the case that pertained to alleged fraudulent issuance of letters of undertaking worth ₹6,498.20 crore.
NEWDELHI: The Central Bureau of Investigation on Monday formally charged Allahabad Bank chief executive officer (CEO) and managing director (MD) Usha Ananthasubramanian, who was the CEO of Punjab National Bank during the fraud perpetrated on it by diamond trader Nirav Modi, and 21 others, including Modi himself.
The finance ministry said Ananthasubramanian was being relieved of her current position at the state-owned Allahabad Bank following the filing of the charge.
In all, CBI charged 22 individuals and three Modi companies in its first charge sheet in the case that pertained to alleged fraudulent issuance of letters of undertaking worth ₹6,498.20 crore.
“Our second charge sheet, to be filed within next few days, will deal with alleged fraudulent issuance of letters of undertaking and credit to firms belonging to Nirav Modi’s maternal uncle Mehul Choksi,” said a CBI official who spoke on condition of anonymity.
In Monday’s charge sheet, the agency named Modi, his brother Neeshal Modi (both are absconding) and seven other executives of Modi’s firms.
“We have also named 12 former or current employees of PNB, including Ananthasubramanian, in the charge sheet,” said the CBI official. Rajiv Kumar, secretary, department of financial services in the finance ministry, said the government has initiated action for removal of Ananthasubramanian and two executive directors of PNB KV Brahmaji Rao and Sanjiv Sharan following the formal charges. Kumar said the PNB board has also divested its two executive directors of all financial and executive powers.
CBI officials indicated that investigators are still looking into the role of some of the other top officials at PNB.
Ananthasubramanian was the head of PNB between 2015 and 2017 when Modi perpetrated the fraud on it by getting letters of undertaking issued without being entered in the bank’s books, and settling the amounts due against them to other banks with money raised from fresh letters of undertaking.
Ananthasubramanian didn’t reply to a phone call and message seeking comment. Modi’s lawyer Vijay Aggarwal too refused comment saying he hasn’t seen the charge sheet.
What brought Ananthasubramanian under CBI was the fact that in 2016 a similar case of fraudulent issuance of letters of undertaking was detected and that PNB honoured it by paying off Indian Overseas Bank, the other bank involved.
Typically raised by importers, such letters allow them to borrow money from banks overseas (usually Indian banks) against a purchase, with the lending bank presenting the letter to the issuing bank for settlement (by which time the importer would have sold the products imported and settled with the issuing bank).
This particular instance didn’t involve any of Modi’s companies, but that was enough for CBI to target Ananthasubramanian.
“Following the detection, the Reserve Bank of India (RBI) asked PNB whether any such fraud has been noticed in its branches as well but the bank told the regulator that all was well in its branches. Files in this regard were processed when Ananthasubramanian was at the helm in PNB.
The PNB brass was aware of such a modus operandi of fraud but still it went on in the bank’s Brady House branch in Mumbai,” said a CBI official who spoke on the condition of anonymity.
The official alleged that top officials at PNB didn’t implement circulars and caution notices of RBI on safeguarding SWIFT (Society for Worldwide Interbank Financial Telecommunication that provides a network for financial institutions all across the world to send and receive information about transactions in a secure and standardised manner) system and didn’t present the factual position to the regulator.
Investigators found that PNB’s SWIFT system was not linked with its Core Banking System (CBS) which allowed the fraud to remain undetected for long.
Internal auditors too did not raise any alarm over large scale fraudulent issuance of letters of undertaking.
CBI invoked charges under sections 409 (criminal breach of trust by a public servant) and 420 (cheating) and Prevention of Corruption Act against the accused.