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PNB tried cover up before Nirav Modi scam exploded: Transferred staff at Hong Kong, Dubai for revealing irregularities

New Delhi: Just months before the Nirav Modi scam tumbled out, Punjab National Bank (PNB) quietly recalled two employees, both internal auditors posted at the lender's Hong Kong and Dubai branches after they exposed a deep rot within its banking system.

Top sources within the investigative agencies probing the matter told Firstpost that authorities have learnt that the PNB action, against its own staff, was a fallout of a concurrent audit, initiated in March 2017, in which they had revealed colossal anomalies.

Sources said VP Singh, PNB’s auditor posted at Hong Kong was sent to conduct an audit of the Dubai branch, while GS Agarwal of the Dubai branch was sent to Hong Kong to complete the concurrent audit.

 PNB tried cover up before Nirav Modi scam exploded: Transferred staff at Hong Kong, Dubai for revealing irregularities

Representational image. Reuters

“Both the officers had flagged various misdeeds including massive NPAs in the state-owned lender's overseas branch. It appears, the report was also sent to the PNB headquarters in Delhi. Subsequently these two officers who exposed the wrongdoings in the banking system were told to return to India in August 2017. What is surprising is the fact that these two PNB officers had not completed their foreign assignment, which was for three years."

"We have asked for a copy of the inspection report and further action will be taken after examining the points raised by the auditors,” sources said, adding that many of these issues will be covered in the chargesheets.

It is learnt that VP Singh and GS Agarwal had pointed out irregularities in granting of loans to companies without due diligence, sanctioning of letters of undertaking (LoUs) and had exposed a cartel of businessmen, who were taking the bank for a ride in connivance with top officials. The two honest and upright officers were subsequently given punishment posting just few months before the Nirav Modi and Mehul Choksi fraud surfaced in the public domain. Despite repeated attempts, the two officers could not be reached for comment.

Sources said that top officials at the PNB head office knew about the fraud to the tune of Rs 14,000 crore a month before they decided to file their complaint with the Central Bureau of Investigation (CBI).

“They tried to hush up the matter in December 2017 as the PNB, at that time, was considering a fresh proposal of loans to Nirav Modi’s companies. When they failed to resolve it, finally a complaint was filed with the central agency,” sources revealed.

A detailed questionnaire sent to PNB’s Managing Director and CEO Sunil Mehta, last week, remained unanswered.

It is learnt the investigators have received details of some PNB officers who were posted abroad over the last five years and how the top brass who aided irregular sanctioning of loans, circumvented rules. They have zeroed-in on an officer who worked with the bank's treasury department and stayed at the Hong Kong branch for four-and-a-half years. Upon his return last year, the officer was sent to London and subsequently handles the back office of a PNB overseas branch.

The network abroad 

Ghazi Traders, which runs a street hosiery shop in Hong Kong, was sanctioned a loan to the tune of Rs 1.5 crore by PNB without any security. The money never returned and the NPA was quietly buried through mathematical jugglery of the banking system. Similarly, a diamond trading company owned by an Indian defaulted on massive loans taken from the PNB, when Usha Ananthasubramanian was at the helm of affairs. The diamond company is located in the same Kowloon area of Hong Kong from where one of PNB’s  branches operates. Mehul Choksi and Nirav Modi too had their accounts in the branch along with other companies that defaulted on PNB loans, and these accounts has been termed as NPAs. PNB’s top boss Sunil Mehta did not respond to the query on NPAs at the Hong Kong and Dubai branches.

The investigator said the entire loan racket is run by a cartel with an Indian fixer handling the operation. He had roped in two bank officials including a PNB officer to compromise the treasury unit of the banks as well to manipulate the daily dollar rates. Instead of taking action against the PNB officer for wrongdoings, the top brass at PNB's headquarters rewarded him by offering him a coveted position in India.

“It has come to our notice that bank employees kept in touch with each other via WhatsApp messages. As per the rule, the dealer is not allowed to carry a mobile phone inside but the rules were violated. We have learnt that the issue was flagged in one of the inspection reports sent to the PNB head office, but subsequently no action was taken,” the sources added.

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Updated Date: May 14, 2018 13:28:45 IST

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