PNB Rs 11,400 crore scam: Strange how fraud went unnoticed by external auditors, RBI; says Meera Sanyal

Financial Express
Sushruth Sunder 
February 16, 2018

After ‘India’s biggest banking fraud’ in the country’s second largest public sector lender Punjab National Bank to the tune of Rs 11,400 crore, top former banker, Meera Sanyal says that how the scam remained undetected by the internal and external auditors remains a mystery.

After ‘India’s biggest banking fraud’ in the country’s second largest public sector lender Punjab National Bank to the tune of Rs 11,400 crore, top former banker, Meera Sanyal says that how the scam remained undetected by the internal and external auditors remains a mystery. “It’s an extremely strange situation. It’s quite clear how the Rs 280 crore scam took place. How the amount rose to Rs 11,000 crore and went undetected is a bit of mystery,” Meera Sanyal former CEO & chairman of the Royal Bank of Scotland in India told ET Now. The ace banker shared that she’s perplexed that the fraud went unnoticed and crossed many lines of defenses.

I’m waiting to get more details to understand the trail of events that led to such a large amount being undetected in the balance sheet of PNB over 7 years, either by the first line of defence, the Operational Risk team of the bank, the internal audit team of the bank, the external auditors or even the Reserve Bank of India, which regularly audits the banks,” the expert noted.

In a press conference yesterday, Punjab National Bank’s MD and CEO Sunil Mehta said that it was the first one to detect and report it to the government agencies and based on which country-wide raids had been conducted on the whereabouts of culprits. The scam at Punjab National Bank involves “unauthorised transactions” of Letter of Undertaking (LoU) between the bank and the now reportedly absconding billionaire diamond merchant Nirav Modi.

According to a statement by Punjab National Bank on Wednesday, the bank had detected some fraudulent and unauthorised transactions (messages) in one of its branch in Mumbai, which was done for the benefit of a few select account holders with their ‘apparent connivance’. “Based on these transactions other banks appear to have advanced money to these customers abroad. The quantum of such transactions is $1,771.69 million (approx). The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land,” read the bank’s statement.


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