The government needs to get to the bottom of Nirav Modi scam

The $1.8 billion fraud perpetrated by the billionaire diamantaire, Nirav Modi, his maternal uncle Mehul Choksi and the clan at Punjab National Bank (PNB) has shaken the public confidence in the Indian banking system. This is, perhaps, the largest scam that has seen the light in the post-independent banking history and it certainly smacks of collusion between top global diamond traders, bank officials and political heavy weights.

There’s no way lowly paid deputy managers, who routinely access Swift system to move millions of dollars across borders, would dare undertake such large fraudulent deals. How is it that Punjab National Bank top rung officials turned a blind eye to the abuse of its letters of understanding which were used to facilitate dollar credits from Indian banks with foreign branches?

Why is it that RBI officials did not show up for inspection after such huge transactions to Modi and associates? Has RBI failed in its duty to protect the interests of commoners? Is it possible that RBI officials were silenced by powers that be to enable one third of the bank’s market capitalisation go down the drain?

How can both internal and statutory external auditors ignore that LoUs were being issued blindly without any security? Is there a possibility that other large diamond merchants also have such cozy deals? Is it a possibility that such deals have had happened in other state-run banks —is it by sheer accident that Punjab National Bank deals have come to light? How is it that Modi dodged the investigators and landed in China? Shouldn’t the CBI and other agencies that were after him be more alert specially after what happened with Vijay Mallya and Lalit Modi?

Given the scale of the scam and how easy it was to hoodwink, can the common folk be faulted for loathing any negotiated settlement by banks with their corporate defaulters, as part of winding down non-performing assets built up over years to Rs 800,000 crore?

While the defaulters of such huge banking frauds are let off with impunity, imagine what would happen to aam admi if he or she default monthly loan instalments owing to exigencies? Will he or she be spared by the system that’s ruthless to honest people with limited means? There have been incidents when private banks hired bouncers to settle loans with its customers.

What Modi did to Punjab National Bank was a possible repetition of the bill discounting resorted to by Ketan Parekh in 2011 to swindle money from Indian banks. Parekh had used Madhavpura Merchantile Cooperative Bank based in Gujarat to get pay orders based on which he mobilised funds to manipulate select stocks and profiteer.

Modi’s modus operandi is similar to the bankers receipts known as tokens used by the big bull Harshad Mehta way back in 1991 through Bank of Karad and Bombay Merchantile Cooperative Bank to mobilise Rs 4,900 crore. Another bill discounting scam of Rs 350 crore at Bank of Baroda hit the headlines as late as 2015. Home Trade scam of Rs 600 crore using cooperative banks by Sanjay Agarwal in 2001 is still fresh for old timers. None can forget the way Chain Roop Bansali of CRB Finance misused facility to print SBI warrants and get drafts worth Rs 57 crore issued in his own name.

A lasting solution to such banking scams will have to be found. Or else, ordinary people will desert banks.