Lok Sabha Question No. 2513 (UNSTARRED), answered on 2018-03-09
Subject: PNB Scam
Ministry: FINANCE
Asked by: RAKESH SINGH, RAJEEV SHANKARRAO SATAV, SUSHIL KUMAR SINGH, SUPRIYA SADANAND SULE, SAUGATA ROY, V. SATHYABAMA, DHANANJAY BHIMRAO MAHADIK, ASADUDDIN OWAISI, PRITAM GOPINATH MUNDE, P.R. SUNDARAM, BALASUBRAMANIAM SENGUTTUVAN, JAYAKUMAR JAYAVARDHAN, SHIVAJI ADHALRAO PATIL, VIJAYSINH MOHITE PATIL

## GOVERNMENT  OF INDIA MINISTRY OF FINANCE DEPARTMENT  OF FINANCIAL  SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. †2513

TO BE ANSWERED  ON THE 9 TH  MARCH 2018/ PHALGUNA 18, 1939 (SAKA)

## PNB Scam

†2513.  SHRI RAKESH  SINGH:

SHRI SATAV  RAJEEV: SHRIMATI SUPRIYA  SULE: SHRIMATI V.  SATHYA BAMA: SHRI ASADUDDIN  OWAISI: SHRI P.R.  SUNDARAM: DR. J. JAYAVARDHAN:

SHRI SUSHIL KUMAR  SINGH:

PROF. SAUGATA  ROY:

SHRI DHANANJAY  MAHADIK:

DR. PRITAM GOPINATH   MUNDE:

SHRI B. SENGUTTUVAN:

SHRI ADHALRAO  PATIL SHIVAJIRAO:

SHRI MOHITE PATIL VIJAYSINH  SHANKARRAO:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether   the  State  run   lender   Punjab   National   Bank (PNB) has reported   unauthorized transactions   worth   Rs.11500   crore   in  one  of  its  branches,   if  so,  the  details   thereof   and  the quantum  of loss to the PNB therein  along  with  the guilty  persons  who  have been arrested;
- (b) whether  the Government  has constituted  any  inquiry  in the matter  and if so, the details thereof;
- (c) whether   the  Government   agencies  including   Central   Bureau   of  Investigation   (CBI) registered  a case in this  regard  and started  the enquiry  and if so, the details  of the agencies  which are enquiring  the case;
- (d) the  extent   to  which   this   fraud   is likely to  affect  PNB  and  other   banks   along   with   the steps taken  or being  taken  by  the Government  in consultation  with  Reserve  Bank  of India (RBI) and banks  to recover  money  which  has already  been sent to foreign  countries;  and
- (e) the  number of  employees   and  their   level   in  hierarchy of  bank   who   have  been  found guilty  / to be in connivance  and the action  taken  against  them  and the further  steps taken  by  the Government  to check  and stop such type  of unauthorized transaction?

## ANSWER

## The Minister  of State in the Ministry  of Finance (SHRI SHIV PRATAP  SHUKLA)

(a)  to  (e):  As  per  Reserve   Bank   of  India  (RBI)  inputs,   Punjab   National   Bank (PNB) reported fraudulent   issuance   of  Letters   of  Undertaking /  Foreign   Letters   of  Credit   for  payments   of import  bills,  amounting  to Rs. 12,645.97 crore,  to RBI through  its Fraud  Monitoring Reporting System.

Central  Bureau  of Investigation  (CBI) has registered  two  cases relating  to the matter  and, as of 6.3.2018, had  arrested 18  persons.   On  the  basis  of  FIRs  registered   by   CBI,  Directorate   of Enforcement   (ED)  has  filed  two   cases  under the  provisions   of  the  Prevention   of  Money Laundering  Act,  2002 and conducted  searches at various  locations  and seized movable  properties and attached  immovable  properties.  Further,  mutual  funds and bank  accounts  have been frozen. Letter   of  Request   to  13 countries   have  been  issued  by   the  court   seeking   details   of  properties, bank accounts  of companies,  etc. ED has moved the court  for obtaining  non-bailable  warrants against  accused persons.  Further  investigation is in  progress.

With  regard  to effect of the fraud on PNB and other  banks,  RBI has stated that  it does not have specific  information. PNB has stated that  it has adequate  assets /  capital  to meet any  liability which  may  crystallise  on the bank.

Ministry  of Corporate  Affairs  has apprised  that  it has ordered  investigation into  the affairs of 107 companies   and  7  Limited   Liability Partnerships   (LLPs)  belonging   to  Nirav   Modi   and  Mehul Choksi  Groups,  to be carried  out by  the Serious  Fraud  Investigation  Office.  Investigation  is in progress. The Ministry  has also filed a petition/application against   the  individuals,   groups and their  entities  belonging  to Nirav  Modi  and Mehul  Choksi  Groups  before National  Company  Law Tribunal,  Mumbai  Bench and the tribunal  has passed an injunction  against  all the respondents and other  companies,  LLPs, trusts  and individuals  from removal,  transfer  or disposal  of funds, assets and properties  of the individuals  until  further  orders.

As per CBI inputs,  as of 6.3.2018,  eight  public  servants belonging  to PNB had been arrested, ranging   from the  rank of  General   Manager   to  Single   Window   Operator.   The  matter   is under investigation. A total  of 21 PNB  employees  have been suspended.

Government  has issued an advisory  to nationalised  banks  to take  immediate  action  as per extant legal/regulatory framework  to ensure that  such/similar  fraudulent  activity  (as reported  by  PNB) is  not  prevalent   in  the  bank.   They   have  also  been  asked to  ensure that   robust systems   and procedures   are  in  place  for  confirming   due approvals,   necessary   applications/documents and entry   in  the  bank's   system in  respect   of  all  Letters   of  Undertakings/Comfort and  SWIFT messages, and ensuring  scrutiny  and reconciliation of Nostro  accounts,  and to take  all necessary steps to safeguard against occurrence of such  frauds. Government   has  further   advised nationalised  banks  to collectively prepare  a report  for effective  management  of operational  risks, including  technology  risk,  so as to safeguard against  occurrence  of frauds.  Government  has also asked nationalised  banks  to examine  all accounts  exceeding  Rs. 50 crore,  if classified  as NonPerforming  Asset (NPA), from the angle  of possible  fraud.

RBI  has  issued  instructions mandating   banks   to implement,   within stipulated deadlines, prescribed  measures  for strengthening  the SWIFT  operating  environment  in banks.  Further,  it has constituted  an Expert  Committee  under the chairmanship  of Shri  Y. H. Malegam  to look into, inter  alia ,  factors   leading   to  increasing   incidence   of  frauds  in  banks   and  the  measures (including  information  technology  interventions) needed to curb and prevent  it,  and the role  and effectiveness  of various  types  of audits conducted  in banks  in mitigating  the incidence  of such frauds.

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