Nirav Modi Case: Finance Ministry Asks Allahabad Bank CEO, PNB EDs To Be Divested Of All Powers

The Central Bureau of Investigation has named Usha Ananthasubramanian, former chief executive officer of Punjab National Bank, in a charge sheet filed in the Nirav Modi case on Monday. PNB executive directors KV Brahmaji Rao and Sanjiv Sharan have also been named in the charge sheet.

Following the charge sheet, the government directed that these officials be divested of their executive powers. “We have issued a formal letter to our directors in the board, and since this is in the domain of the board to decide, the boards will take an appropriate decision,” Rajiv Kumar, secretary in the government’s Department of Financial Services told reporters.

Ananthasubramanian is currently the CEO of Allahabad Bank. She headed PNB between August 2015 and May 2017 and also served as an executive director at the bank between July 2011 and November 2013. Rao and Sharan are serving EDs at PNB.

Briefing the press on details of the case, the CBI said that investigations had revealed that the fraud was perpetrated by misusing the SWIFT platform. In addition, proceeds of the buyers credit were diverted to pay off outstanding liabilities of firms related to Nirav Modi. “Funds were siphoned off to purported overseas supplier firms that were set-up and controlled by Nirav Modi and associates.”

The first charge sheet relates to the case against Modi, CBI officials told reporters earlier in the day. A separate one in the second case involving Choksi will be filed later.

Detailing the role of the bankers named in the charge sheet, the CBI statement said that the senior officials did not implement the circular and caution notices issued by the RBI regarding safeguarding SWIFT operations. “Reconciliation of SWIFT messages and Core Banking Systems were not done despite repeated circulars, caution notices.”

The bankers named in the charge sheet have been charged under Section 120 B, Section 420 and Section 409 of the Indian Penal Code, said the CBI. Section 120 B deals with criminal conspiracy, Section 420 with cheating and dishonesty inducing delivery of property, and Section 409 with criminal breach of trust by public servant, banker, merchant or agent. They have also been charged under provisions of the Prevention of Corruption Act, the CBI said.

The Back Story

In February, Punjab National Bank disclosed to stock exchanges that it had filed a formal complaint with the CBI regarding fraudulent transactions worth nearly $1.8 billion.

According to the complaint, some of PNB's employees at its Brady House branch in Mumbai had colluded with representatives from Modi's companies to issue fraudulent letters of undertaking through the bank's SWIFT network. By using these fraudulent LoUs as a form of guarantee, Modi's company had been able to access buyer's credit from foreign lenders as well overseas branches of Indian lenders. However, PNB did not have a record of any such LoUs issued, neither did it approve any fund based or non-fund based exposure to Modi's companies.

The issue of fraudulent LoUs allegedly started in 2011 and continued over a period of seven years. It was detected only after the bank appointed a new manager in-charge of LoUs at the Brady House branch.