Must-Read: FRAUD IN PUNJAB NATIONAL BANK - The Fearless Indian


  • Guest Writer
  • March 9, 2018
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INBEF Demands for taking serious Action against various Auditors, Board Directors-Top Executives, RBI Inspectors for ending such frauds and for taking action against guilty. INBEF also opposes the idea of Bank Privatisation and opposes Appointment of Parliament Committee.

After detection of fraud of over Rs. 12,500 crore in PNB (which is feared to have increased to Rs. 17500 crore), various views are being expressed by various experts in different sections of media, discussions are held on various TV Channels on the subject. Indian National Bank Employees’ Federation              (INBEF), is the first union in Banking Industry which started agitation on NPA issue in 2014 and taken out a Public Awareness March in Mumbai. It is different matter that instead of appreciating the move the Bank Management and Government probably at the insistence of the Big Bad defaulters had taken hostile stand against the union and allowed some of the defaulters to flee the country. In the name of NPAs and huge write off of loans Banks are being looted of Lakhs of crore every year which is the biggest scam continued years together with political involvement. In the present PNB frauds also hours are wasted in blame game for political benefits as to who is responsible whether UPA or NDA Government, and the real measures for ending such frauds are sidelined.

The total loss due to these scams alone in banking, if shared amongst the population of 125 crores would put the burden squarely for Rs. 2931/- approx. on the shoulders of each Indian. The public disgrace is enormous, solutions are invisible and the administration has lost sight of and incapable of gazing the size and volume of the fraud and modus operandi as well.  Under the circumstances the people of India are looking to save not only the Industry but the ECONOMY which has survived the great global melting down in way back in 2008 when the many western economies were paralysed and many heads of the countries have adored the Indian Economic Policies.

The Scholars and Economists have started analysing the cause of frauds whose needle is pointing towards RBI for not having any control on banking in spite of many arsenals are in their reservoir and many regulations have equipped them to deal with the situation; it is also pointing out to the total failure on the economic policies of the country and needle is also fixed on the individual Boards of Banks for having adopted very violative practices for lending which have been discarded by foreign economies.  The individual boards in presence of RBI and Finance Directors have recklessly sanctioned and enhanced the credit limits of the defaulters’ companies in thousands of crores, in total disregard to the credit norms and set out policies.

This has grossly endangered the transparency which is much talked about and less implemented in banking and economic policies. For control of Banks, the Bank Beauro Board was established and it is widely criticised that this white elephant with zero performance for last two years is meant only for slogans and receiving wrath of many for its total failure to curb either NPAs or frauds in big ticket advances.

Surprisingly the Finance Dept through RBI has laid Prompt Corrective Action restricting the Public Sector Banks from expanding the branch network, deployment of staff and expansion of credit.  With this tool PNB, one of the so called “Turning Around” banks has been provided with Rs. 4714/- crores for recapitalisation and also promised to provide under recent publication a sum of Rs. 5473/- crores for ensuing financial year.  Now the question arises as to what are the norms that this Bank (PNB) is made entitled to such huge recapitalization?  In case of PNB, it is now openly asked that in spite of several steps the Audit Department is taking, under the ultimate supervision of CAG, why the system audit could not locate the PNB’s failure to reflect SWIFT TRANSACTIONS that has exposed the bank for this huge financial scam.

The INBEF wants streamlining on the following factors leading to frauds:

  1. As per the ‘Working Paper’ 505 on frauds in the Indian Banking Industry, Published in March 2016 the circular was issued by RBI to introduce the concept  of Red Flagged Account (RFA) and Early Warning Singles (EWS) for early detection and prevention of fraud, need to have robust credit appraisal system, efficient supervision post-credit appraisal system, effective recovery mechanism and continues monitoring.
  2. The INBEF also demands requisite standards of Corporate Governance to curb
  1. the frauds increased due to new system of payment under Cheque Truncated System (CTS), increasing cyber frauds and guided use of credit system under Documentary Credit (Letter of Credit /Undertaking).
  2. Under-reporting / ever greening of projects in infrastructure, power, mining sectors with high gestation period as the total NPA on PSBs and PVBs are on very high side.
  1. The system  for Credit Delivery should be strengthened for accepting project with realistic face value at initial stages, earlier classification of bad debts, due diligence at every levels.
  2. The involvements of third party agents/agencies are traced in such frauds and the agents like Charted Accountants, legal experts get easily escaped from accountability for want of any provisions in the respective laws. It is therefore demanded that there should be initiation of criminal suits rather than civil suits against such third party agencies if their involvement is established.
  3. It is also demanded that various Audits and their functions under different heads be brought under C and A General Act to bring in their accountability and
  4. On account of diverse credit portfolios and lack of credit expertise the Appraisal system and monitoring mechanism should be improved.
  5. Quite often than not, in DRT or while recovery process is on, the legal reports on the properties mortgaged, do not come to the bankers’ rescue and the legal opinion are found not the strength of banker. Even the valuations Reports of expert valuers, inflated loans than realistic requirement especially by Chartered Accountants tailor-made project always misguide the bankers.
  6. The acts of the fraudsters and willful defaulters should be treated as criminal offence.
  7. The Banks under RBI should develop more powerful Internal Rating agency both internal and external which evaluates big ticket projects before sanctioning loan. And bank should obtain such reports on project from 2/3 independent IRAs.
  • In addition to KYC norms and KYE (Know Your Employees) norms the bank, under the guidelines from RBI should also develop KYM (Know Your Market) for effective and smooth execution so that the cases like PNB (Nirav Modi) would be minimized.
  • Some Industrialists and some Economist are mooting the idea of Privatisation of PSBs. The scale of recent Bank scams and potential losses faced by Banks holding NPA loans given to large companies and individuals is almost becoming an excuse to demand the privatization of PSBs. But 66 Economists have signed a statement stating” PSBs have played a critical role in financial inclusion, the project is still incomplete. Because of nationalization Banks have spread in Rural Sector and have provided credit to Agriculture, Small Farmers and Small Scale Enterprises. Before nationalization 35 Private Banks would fail every year.” Hence Privatisation is not the solution for ending scams. We opine that Privatisation is mooted to protect large NPA borrowers of PSBs and to divert public attention from NPA issue and to enable Banks to write off Bad loans.

INBEF demands the following measures to end such frauds:

  • Fixing Accountability of CMDs/ EDs/CEOs/ Board Directors for their misdeeds and failures: Government is avoiding framing rules and regulations for fixing accountability of CMDs/ EDs/CEOs/ Board Directors for their misdeeds and failures. In absence of such regulations PSB Boards can sanction or write off loans in crores without any hindrance. Rashtriya Central Bank Officers’ Congress, an INTUC affiliated union in Central Bank of India has filed a Writ Petition in the Hon. High Court at Bombay (Sr. No.2669 of 2012) to make CMDs/EDs/CEOs of Banks accountable and for framing rules to fix their accountability. In the said petition the Govt paid no heed to Courts request to file an affidavit even during 3 ½ years of NDA Govt Rule, which indicates that the present Government also does not want to frame the rules holding top executive responsible for huge NPAs and fraudulent top executives. The Parliamentary Standing Committee on Finance (under the chairmanship of Dr. Veerappa Moiley) in its 39th Report Submitted to Loksabha & Rajyasabha on 7th December, 2016 has also made a recommendation for framing rules for fixing responsibility / accountability of CMDs/EDs/RBI Directors/CEOs & Government Directors on Board for NPAs. The Government did not accept the recommendation of the Committee (Sr. No. 2). The Committee did not accept the reply given by Government. The Government has not taken any action for implementing the recommendation. Hence it is very apparent that the Government wants to protect the CMDs/CEOs/Directors of Banks. If they are made accountable for their misdeeds Government won’t be in a position to pressurize them. Our demand is that the Government should accept the committee’s recommendations for framing rules for fixing accountability of CMDs/CEO’s/EDs/Govt. Directors/ RBI Directors on PSU-Boards for NPAs.


Subhash S.Sawant

General Secretary

Indian National Bank Employees Federation

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