The money is gone. The fraudster is not coming back. To rub salt on the wounds, he accuses the Punjab National Bank of destroying his business. The CBI and the Enforcement Directorate can now go through the usual gamut of raids, seizures, arrests etc, as in numerous far bigger bank heists before it, but not much can be recovered from the crook. Nirav Modi is an NRI, and beyond the reach of the law.
This is not the first bank fraud—and, if we know how things work, nor will it be the last. The same PNB lost nearly Rs 8,000 crore, again to a jeweller, someone called Jatin Mehta, in 2011. Last heard, Mehta was safely ensconced in Dubai. The lender wrote off the loan to Mehta’s Winsome Diamonds. And soon it was business as usual at PNB. Around the same time came along Nirav Modi. The procedures, processes at the bank remained unchanged, the only difference being in the name of the con artist.
Our refusal to learn from our blunders is legendary. In the early 1990s, Harshad Mehta had overwhelmed the entire banking system, misusing inter-bank instruments to illegally access thousands of crores, not a paise his own, to push the Sensex to dizzying heights. And when the Opposition MPs drew the then Finance Minister’s attention to the irrational exuberance of the share markets, the latter ticked them off, famously intoning in his barely audible voice, “I don’t lose sleep if the market goes up or down…” Indeed! That scam cost the taxpayers tens of thousands of crores at a time when the rupee was still worth something.
If that was a systemic failure, it ought to have been rectified following the broad daylight Harshad Mehta robbery, especially when the State Bank of India was the main victim. It was not. Now, in the case of Nirav Modi, collusion of a couple of mid-level employees does not explain how such a large amount could have flown out from the bank’s vaults—okay, at its behest from other banks’ treasuries. Believe it or not, the most plausible reason is again systemic failure.
Being one of the first public sector banks to computerise operations, PNB had a basic problem. It seems its Core Banking System was not talking to its SWIFT computers. CBS is at the heart of a bank’s daily operations, recording deposits, withdrawals, other such transactions, and tallying balance 24×7. On the other hand, SWIFT, or Society for Worldwide Interbank Financial Telecommunication code, regulates trans-border transactions among a large number of Indian and foreign banks.
Basically, the fraud at PNB went unchecked for so long—it began in 2011, remember—because there was no communication between PNB’s CBS and SWIFT operations. At least in the case of Bangladesh Bank, counterpart of India’s RBI, the fault did not lie with the system when it lost nearly a billion dollars through the fraudulent use of SWIFT code to transfer money to fictitious accounts in a third country in 2016. The crooks had managed to access the secret codes and account numbers from insiders and taken advantage of the different time zones to evade counter-checks while ordering a New York-based bank to transfer the money.
In the Nirav Modi case, it was not only the same bank, but the same Brady House branch in Fort, Mumbai, which operated the heist for years till the transfer of a key employee burst the scam. Of course, his superiors, the internal and external auditors, and the Central bank, were all sleeping on the job while the high-profile jeweller SWIFTly helped himself to hundreds of crores of taxpayers’ money.
Belatedly, the RBI has now directed banks to link their core banking computers with the SWIFT computers. Some would say it was like locking the stable door after the horses had run away, but this is better than not being able to put in place regulatory and security procedures when Harshad Mehta first stunned the world by dipping into bank funds to jack up the share markets to dizzying heights. And that was back in 1991-92.
At least, this government does not sleep on the wheel. The flawed and rotten systems as and when in the news for the wrong reasons have immediately led to corrective measures being put in place. The point: Why wasn’t the PNB directed to take stringent steps to prevent another heist when in 2011 Jatin Mehta flew away with Rs 8,000 crores? Because at that time ministers of the realm and their children themselves were engaged in helping all and sundry to dip into the bank coffers, the result of which was non-performing-assets running into lakhs of crores. Remember they enjoyed advantage strategic to line their pockets with unheard of sums in loot and plunder.
TALK OF SWEAT EQUITY, WILL YOU?
The Sunanda Pushkar death remains a mystery. As any forensic expert would tell you, it is hard to put together various jigsaw pieces in such whodunit cases once the evidence has been destroyed with or without the complicity of the police. But, no question, there was a lot that raised suspicion about Shashi Tharoor’s own conduct when his third wife was found dead in a five-star hotel when the UPA was still in power.
But our point is slightly different. In all this fuss over his death, what is completely forgotten is how Tharoor had to resign as a junior minister when it was found that his then girlfriend, and later wife, Pushkar, had helped herself to tens of crores in illicit commission through the aegis of Tharoor who had helped put together an odd-bod group of investors for buying the Kochi IPL franchise. Whether or not Tharoor personally gained a paise from the so-called sweat equity, the taint of corruption cannot be brushed aside. The intention was clear. And that is why we insist that Tharoor is a typical Congressman, no worse, no better.