PNB misrepresented factual position on LoUs to RBI: CBI charge sheet

The agency has said then PNB MD and CEO Usha Ananthasubramanian and her top officials also failed to prevent the fraud despite having knowledge of the modus operandi, according to sources.

Diamond merchants Nirav Modi and his uncle Mehul Choksi allegedly cheated PNB by availing credits worth over USD 2 billion from overseas banks, on the basis of fraudulent LoUs issued by PNB staff, which were siphoned off by them.

An LoU is a guarantee given by an issuing bank to Indian banks having branches abroad to grant short-term credit to the applicant.

Ananthasubramanian, who is currently the MD and CEO of Allahabad Bank, Executive Directors of Punjab National Bank K V Brahmaji Rao and Sanjiv Sharan, and General Manager (International Banking) Nehal Ahad are four senior bank executives who have been charge-sheeted by the agency.

Giving details of the charges against Ananthasubramanian, the agency sources said she was the MD and CEO of PNB when a similar case of LoU fraud was reported from Indian Overseas Bank, Chandigarh in 2016 where credits were issued by PNB's Dubai branch on the basis of these guarantees.

The modus operandi in the IOB case was similar to the Nirav Modi case. Hence, the top brass of PNB had complete knowledge of the methods involved by fraudsters to cheat the banks using LoUs, the sources said.

After the IOB fraud had surfaced, the RBI had issued guidelines and circulars to prevent such frauds in the banks which were allegedly not implemented in PNB in its entirety, they said.

All these files were processed by Ananthasubramanian and three other top officers -- Rao, Sharan and Ahad, which shows they were completely aware of the modus operandi of such frauds being perpetrated, they said.

The Reserve Bank of India had sent a questionnaire to the officials seeking to know the status of LoU issuing process in their bank which was responded to by Ahad in concurrence with his seniors including Ananthasubramanian in which he had stated that all was well in the bank, they said.

This was a clear "misrepresentation" of facts to the RBI by top officials of PNB, they said.

The sources said naming of Ananthasubramanian, who was at the helm of affairs in Punjab National Bank during 2015-17, in the charge sheet did not mean that her predecessors had been cleared by the agency.

The agency said the time period of the scam was spread between 2011-17 and probe into the role of other officers was underway.

They said the present charge sheet, filed in a special court in Mumbai, primarily deals with the first FIR registered in the case relating to the fraudulent issuance over Rs 6,498.20 crore worth of LoUs to Diamond R US, Solar Exports and Stellar Diamonds.

The agency has not given in detail the role of Mehul Choksi in the present charge sheet. It is likely to come up when the CBI files supplementary charge sheets in the case related to the probe into his Gitanjali Group.

The CBI has registered three separate FIRs in connection with the alleged fraud of USD 2 billion in the public sector bank by the companies of Nirav Modi and Choksi.

Both Norav Modi and Choksi had left the country before PNB filed the complaint with the CBI.

Senior officials of PNB did not implement the circulars and caution notices issued by Reserve Bank of India regarding safeguarding SWIFT operation through which messages were sent to overseas banks to issue loans to the companies of Nirav Modi, they said.

Reconciliation of bank's core software (called CBS) and SWIFT messages was not done despite repeated circulars caution notices of the RBI which allowed a deputy manager to issue these guarantees bypassing any scrutiny by the bank, they said.