PNB fraud: RBI examining enforcement action, issues confidential circular

The RBI, however, declined to share details of communication received from the PNB on the alleged fraud

With multiple agencies probing the alleged Rs 130 billion fraud at state-run Punjab National Bank, the Reserve Bank of India (RBI) says it has conducted its scrutiny and the matter is currently under examination for "enforcement action".

Replying to an RTI query, the central bank also said it has been issuing necessary instructions to banks from time to time on a variety of issues of prudential supervisory concern, including the management of operational risks inherent in the functioning of banks.

Asked to provide details of action taken by the RBI after receiving input of suspected fraud at PNB and steps being taken to check such recurrences, the banking sector regulator said a confidential circular on time-bound implementation and strengthening of 'SWIFT' related operational controls was issued to public and private banks on February 20.

SWIFT (Society for Worldwide Interbank Financial Telecommunications) is a global messaging network used by financial institutions across the world to securely exchange information and instructions among themselves with the use of pre-assigned codes.

"Further the scrutiny is conducted in the matter and is under examination for supervisory/enforcement action," the RBI said in response to the RTI application filed by a PTI correspondent.

The RBI, however, declined to share further details of the February 20 circular, saying it was "exempt from disclosure under section 8 (1) (a) of the RTI Act, 2005, since its disclosure may prejudicially affect the economic interest of the State."

The PNB initially reported to the RBI on January 29 an incidence of fraud of Rs 2.8 billion at its Brady House branch in Mumbai. This information was subsequently updated and revised under the fraud reporting platform on multiple dates, the RBI said.

The central bank, however, declined to share details of communication received from the PNB on the alleged fraud.

"In view of the ongoing investigations into the matter by the investigative authorities and third party information involved, the information sought is exempt from disclosure,' the RBI said.

Among various agencies, the CBI is looking into the over Rs 130 billion alleged fraud in the PNB committed by billionaire jeweller Nirav Modi and his uncle and Gitanjali Gems promoter Mehul Choksi.

The Enforcement Directorate has also filed two money laundering cases against Modi and Choksi to probe the alleged fraud.

It has conducted a total of 251 country-wide searches in the case after it began the criminal probe against the accused in February, resulting in seizure and attachment of diamond, gold, precious and semi-precious stones and other movable and immovable assets.