As more details continue to come to light in the Nirav Modi scandal that defrauded Punjab National Bank (PNB) in a combined consortium lending scheme and private financing scenario, an internal report of 162 pages has revealed that the extent of negligence when it comes to vigilance on behalf of the bank by 54 employees had led to the scandal being perpetrated in the first place. This is a far cry from the eight employees who have been charged by the police, or the twenty-one employees that CEO Sunil Mehta has said he has suspended as a result of this issue coming to light.
The total value of this fraud, estimated as being two billion dollars, is now being dealt with by recalling into the spotlight staff who have already retired from PNB. The primary person of interest in this regard is former Deputy Manager of PNB’s Brady House branch in Mumbai, Gokulnath Shetty, who is now at the heart of the controversy. In what could easily be construed as a case of scapegoating, the report alleges that Shetty acted out of the lines of established protocols by using his personal email address to provide authorization for forex transactions that were conducted on behalf of the Modi group, as well as his failure to conduct timely reconciliation of SWIFT payments on the bank’s internal software because the two were not linked. The report goes on to state that during his tenure with the bank, Shetty authorized over 1200 credit guarantees that were known to be fraudulent.
However, points of interest about the report itself are that it makes no direct comment on the fact that those it alleges were part of this fraud were ever aware that they were perpetrating a fraud, while pointing out monitoring lapses such as “red flags” being missed by internal auditors, who in the period between 2010 and 2017 visited the branch 10 times but did not report anything amiss, in spite of glaring gaps in the paper trail surrounding these transactions. Of most interest, perhaps, is that Shetty, as a mid-level employee of PNB, should have not been allowed to okay transactions above 37,000 dollars in value, but managed to issue fraudulent credit guarantees of over fifteen million dollars back in 2011, one of his first major transactions after joining PNB in 2010.