FM Arun Jaitley slams oversight lapses amid PNB fraud probe

Arun Jaitley did not specifically refer to the scandal enveloping Punjab National Bank in his speech to a room full of bankers, but his repeated referral to “a stray incident” appeared clearly to be aimed at the massive alleged fraud linked to diamond billionaire Nirav Modi.

Jaitley is the highest-ranking government official to so far weigh in on the case, in which bank employees are suspected to have steered fraudulent loans to businesses tied to Modi and his uncle Mehul Choksi.

Modi’s lawyer had earlier denied the allegations against him.

Jaitley said the country needed to examine “the lack of ethics that a section of Indian business follows”, and said internal and external auditors needed to examine whether they had “looked the other way or failed to detect” any wrongdoing.

The Finance Minister also said “the supervisory agencies” needed to “introspect as what are the additional mechanisms they have to put in place to ensure that stray cases don’t become a pattern again”.

“It is incumbent on us as a state ... to chase these people to the last possible conclusion to make sure the country is not cheated,” he said.

Asked after the address in New Delhi if he had any specific comment on PNB, Jaitley said: “I have said in the speech what I had to say.”

Since PNB disclosed the fraud last week the bank, auditors and the Reserve Bank of India have been under the spotlight over how they could have failed to detect a scam in which employees are suspected to have sent fraudulent loan guarantees through the SWIFT interbank messaging platform to lenders overseas.

Soon after Jaitley’s speech the RBI, the country’s banking regulator, said it had alerted banks about the need to prevent any “potential malicious use of the SWIFT infrastructure” at least three times since August 2016.

Lenders had not fully implemented all of the required measures, the central bank said. It did not name the banks.

The RBI added it had mandated lenders on Tuesday to implement measures to strengthen their oversight of the SWIFT platform.

Local media on Monday reported the government had written to the central bank calling on it to improve its oversight mechanism of lenders.