CBI Gets Going In PNB Scam; Congress Promoted, Benefited From Scandal, Says Nirmala Sitharaman

The Central Bureau of Investigation (CBI) has got cracking in the Rs 11,500 crore scam involving diamond businessman Nirav Modi, arresting three persons in connection with the alleged fraud. Key among the three is Gokulnath Shetty, deputy manager at Punjab National Bank (PNB) Brady House Branch in Mumbai. The other two arrested are Manoj Kharat, a single window operator, and Hemant Bhat, authorised signatory of the Nirav Modi Group. All the three will be produced in a Mumbai court later in the day.

Shetty had issued letters of undertakings (LoU) without getting his higher authorities approval for the Modi Group and along with Gitanjali Gems, owned by Modi’s uncle Mehul Choksi since 2011. However, Shetty was one of the PNB employees authorised to use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system that allows financial transactions worldwide in a secure environment.

Details of the scam emerging in the media showed that Shetty was due to be transferred from the Brady House branch in 2015 but how he got it blocked is a mystery. Economic Times, quoting a PNB staff, said Shetty’s transfer could have been held back since he was holding a specialist position. However, some wonder why Shetty, who joined the branch in 2010, was not transferred after he completed five years at the branch as per norms for public sector banks.

Interestingly, details of the scam broke soon after Shetty, who opted for just one promotion during his service time, retired in January. He had gone missing until he was arrested on Saturday (17 February).

Banking authorities are surprised that the LoUs issued by Shetty were accepted without any cross verification all these seven to eight years by the 25-odd banks that received them.

Social Media Sways In Favour And Against

Details of the CBI First Information Report (FIR) in the case with the agency showing 143 letters of undertaking (LoU) between 1 March 1 and 2 May last year had the social media criticising the central government and the Reserve Bank of India (RBI) of being slack in taking action.

But supporters of the government said these could have hardly been noticed by the officials since Shetty had kept details away from the higher ups.

Congress Promoted, Benefited From Scam: Nirmala Sitharaman

Union Defence Minister Nirmala Sitharaman told media in Lucknow on Saturday (17 February) that the Narendra Modi government was trying to clean up the mess created by the Congress. She asked the Congress to explain why the director on Allahabad Bank board Dinesh Dubey was asked to quit when he flagged concerns.

Armed with documents, the minster alleged that senior United Progressive Alliance (UPA) functionaries, including Congress president Rahul Gandhi had promoted and benefited from the scam. She pointed out that Gitanjali Gems scrips were suspended for six months from trading on the National Stock Exchange in 2013. But on 13 September 2013, Rahul Gandhi attended a promotion event of the jewellery company and two days later, a proposal for restructuring and provision of an additional loan of Rs 1,500 crore for it was discussed at the Allahabad Bank board meeting. “Join the dots," said Sitharaman.

The Minister said senior Congress leader A M Singhvi’s wife, Anitha Singhvi, is a director of one of the firms that has dealing with Nirav Modi's jewellery company.

Sitharaman said that the government would leave no stone unturned to ensure the accused were brought to book.

New Angles To Scam

Further angles on the scam emerged with one claim being that Nirav Modi reportedly called on Rahul Gandhi’s brother-in-law Robert Vadra on 3 January this year. Three days later, Modi left the country with his family. Other allegations charged some top Congress leaders getting money in their accounts abroad from Nirav Modi and Rahul Gandhi meeting him in Bangkok and London. Another allegation linked the scam to the later arms dealer Adnan Kashoggi and industrialist Hasan Ali.

Diamond Trade Under Scanner

The scam has brought the trading of diamonds under scrutiny. Rough diamonds are now being seen as a tool for round-tripping of funds into India through fake invoices. The LoU issued by Indian banks is against the credit given to these diamond firms by firms abroad. The Indian banks will be liable if these firms borrowing abroad default. In the case of the Nirav Modi scam, the PNB employees led by Shetty did not record the LoUs they sent to banks abroad in the core banking system, which amounts to forgery. Those in the know of how the banks SWIFT system operates say that PNB official should be held responsible for this fraud. The bank is likely to face prosecution in Hong Kong for violation of the Hong Kong Monetary Authority regulations.