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Punjab National Bank (PNB) has told the Central Bureau of Investigation (CBI) that the Rs 114 billion scam could have been averted had officials of overseas branches of domestic banks raised the red flag.
Significantly, the Delhi-based public sector bank has not found any role of chartered accountants, statutory auditors, and empanelled valuers in the alleged scam in its in-house investigation, according to the bank’s submission to the CBI.
In its complaint dated February 13, related to the Mehul Choksi group of companies, based on which the CBI filed an FIR on February 15, the bank said the letters of undertaking (LoUs) issued by its officials to overseas branches of domestic banks were in clear violation of Reserve Bank of India (RBI) norms, and these were not detected by the latter. It said, though the RBI prescribes credit for import of semi-precious and precious stones, including pearls, it should not take more than 90 days. But, the credit allowed in most cases was for about 360 days.
“This should have evoked suspicion in the minds of overseas branches of Indian banks extending buyers credit. These banks never raised any alarm on violation of the RBI guidelines and continued to provide funding against fraudulent LoUs,” the bank wrote in its complaint to the CBI’s joint director in Mumbai on February 13. The bank even pointed out that “there were several discrepancies in LoUs, which could have been easily detected by ordinary due-diligence”.
This assumes significance in light of PNB Managing Director and Chief Executive Officer Sunil Mehta’s repeated public comments that the bank will only pay up genuine liabilities established during the process of the investigation.
The PNB also named the banks in the complaint, which included the Frankfurt and Mauritius branches of the State Bank of India, Bahrain branch of Canara Bank, Antwerp (in Belgium) branch of Bank of India, and Hong Kong branches of Axis Bank and Allahabad Bank. In its fresh complaint, the PNB has detected 143 LoUs. The total number of fraudulent LoUs now adds up to 151.
The PNB declared the bank accounts of the Mehul Choksi group of companies as fraud on February 7. The names of the firms in the complaint included Gitanjali Gems, Gili India and Nakshatra Brand. “There is no documentary evidence available to prove that these import transactions are bona fide trade transactions,” the PNB noted.
According to the PNB’s February 13 complaint, LoUs to Mehul Choksi-promoted companies from March 2017 were detected as fraudulent.