As winter turned into spring, India was hit by another season of scams. Daily headlines bring new disclosures and revelations on astronomical sums of money swindled from public sector banks, be it the Nirav Modi-Punjab National Bank scam or the Rotomac Scam. But amidst the deluge of words and opinions, one voice has been missing. India is waiting to hear from its Prime Minister and self-proclaimed chowkidar of the people’s treasury, about all these disturbing headlines.
Pictures have emerged showing Nirav Modi among other CEOs posing with the Prime Minister at the World Economic Forum in Davos, Switzerland (see photo above), in late January—after, it turns out, Nirav Modi allegedly cheated the country of Rs 11,400 crore and had left the country on January 1. One of these photos was released by the Prime Minister’s Office, the Press Information Bureau and Ministry of External Affairs. The main opposition party Congress also released a video taken at an event held at PM Modi’s official residence on November 5, 2015, to which Mehul Choksi—Nirav Modi’s maternal uncle and co-accused—had been invited. The video showed PM Modi address Choksi familiarly as ‘Mehul Bhai’ in his speech, as if he were a close friend. Mehul Choksi, Chairman and MD of Gitanjali Group, left India on January 4, 2018. Today, people want the PM to speak about whether he will be able to bring “Mehul Bhai” and Nirav Modi back to India to face justice, or will they continue to cock a snook at India from foreign shores, a la Vijay Mallya and Lalit Modi.
The bank fraud scam has once again underscored the growing belief that the last four years have been ‘acche din’ for only a few corporates who are perceived to be close to the Modi government and top BJP leadership. From relaxing norms to adjusting NPAs into long-term loans, corporate debt restructuring and roll-overs, etc, a few corporate houses have had it easier than most. And the Indian taxpayer has been picking up the tab.
According to Reserve Bank of India’s data, PSU banks reported loan fraud cases worth Rs 61,260 crore over the last five years. With the recent Nirav Modi-PNB scam, the amount has now ballooned to over Rs 72,000 crore. And these are only the frauds that have been reported. The actual damage from defrauding PSU banks could well run into lakhs of crores. Something is clearly very rotten in the whole system of public sector bank loans.
What should really worry the Prime Minister is that the Opposition is linking the bank fraud scam with his demonetisation exercise. Congress president Rahul Gandhi said, “This [bank fraud] started on November 8, 2016 when Modiji turned 500 and 1,000 rupee notes into scrap. He took out all the money from people’s pockets and put it in the banking system,” and alleged that a scam of this level could not have been done without high level protection.
The Congress president also questioned the Prime Minister’s silence, saying “Several ministers are speaking—social justice minister, defence minister. But the finance minister and Prime Minister, who are responsible, have not spoken a word about it.” Rahul Gandhi asked PM Modi to explain how the scams happened and what steps were being taken to ensure that the banking system in India was safe. The Congress president said, “The fact of the matter is that the PM has, through his actions, destroyed the financial system of this country. He has demonetised the economy. He has taken money from people’s pockets and put it into the banking sector and now his friends and cronies are stealing it from the banking sector and the PM is not saying anything.”
Indians are beginning to wonder whether the government announced demonetisation to fill the banks with money so that they could make loans easily available to corporate friends and these would later turn into NPAs. They are beginning to believe there is truth to the rumours that Raghuram Rajan was shunted out as RBI governor because he was opposed to demonetisation, and was coming down heavily on corporate NPAs. After all, it is the Indian taxpayer who ultimately pays when publicly-owned banks have NPAs on their books.
CPI(M) MP MB Rajesh told NH that the country now was in the grip of the worst form of crony capitalism. “The most worrisome part of this scam (PNB) is that it has eroded the credibility of banks across the country. The Modi government is least bothered about common people,” he said.
West Bengal Chief Minister and Trinamool Congress chief Mamata Banerjee expressed a similar concern. “This is just the tip of the iceberg. This big banking fraud was fuelled at the time of demonetisation. Big money laundering happened during DeMo. Key bank officials were changed. Who are these people put in? There are more banks involved. The full truth must come out,” she tweeted on February 18. Banerjee’s comment on the Nirav Modi-PNB scam being just the tip of the iceberg may yet prove correct.
Senior journalist Paranjoy Guha Thakurta, who has been routinely exposing crony capitalism in India, alleged that if the PNB scam is inves-tigated properly, many other shocking scams would come to the fore. “It is closely linked with the diamond trade and the diamond traders are connected to the BJP leadership. Like Nirav Modi and Mehul Choksi, many big diamond traders take money from nationalised banks on the basis of LoUs and many of them indulge in frauds as well,” he alleged.
Subsequent to the PNB disclosures came the Rotomac scam, which has reportedly left several public sector banks with bank loan defaults to the tune of Rs 3,695 crore. Then, we learned that in 2016, Jatin Mehta of Winsome Diamonds ran away owing Rs 6,800 crore of money taken from a consortium of banks led by the Standard Chartered Bank, and settled in the Caribbean island of Saint Kitts. He has now taken citizenship of that country, with which India has no extradition treaty. No one knows whether the process of recovering the country’s money from him has even begun.
These scams have not only tainted the Modi government as one under which scamsters have flourished, they have also given the Opposition sufficient ammunition to launch attacks on the Central government and on the Prime Minister himself. Opposition politicians are openly mocking the candidate Modi’s call to the crowd at Jhansi during the campaign for the 2014 general election, to make him the ‘chowkidar’ of people’s money. That term has become an embarrassment for the PM. Indian social media is flooded with satires, jokes and cartoons on the silent ‘chowkidar’.
Mohan Guruswamy, an expert in economic affairs and a former adviser to the Ministry of Finance alleges that the irony is the country’s ‘Chowkidar’ himself is hand-in-glove with thieves. “This is my direct question to the Prime Minister of India. Why was Mehul Choksi there at his residence when the financial elite of the country was there, the government’s top officials were there and why did the PM mention his name? Why does he so love to indulge in this kind of influence- building exercises for his friends? The Prime Minister owes an answer to the nation. As PM, he can’t just escape from his responsibility. Like Nirav Modi, many other diamond traders engage in over-in¬voicing and under-in¬voicing. Due to their political clout, diamond merchants were able to force the government to reduce GST on diamonds,” alleges Guruswamy.
Senior journalist and founding editor of People’s Archive of India (PARI), P Sainath, says, “When it comes to waiving off farmers’ loans, everyone creates a hungama. And for corporate waivers, subsidies worth thousands of crores are given without blinking an eye. The rulers of this country now intend to benefit corporates in every possible way. That is why they flee the country with lakhs of crores of public money. On the other hand, the farmers are not able to pay back very small loans and are harassed by the banks and driven to commit suicide,” says the veteran scribe.
The biggest question on everyone’s mind is what was the RBI doing and how was this huge fraud conducted right under its nose? KC Chakrabarty, former RBI Deputy Governor and former chairman and managing director of PNB, alaimed that the total chunk of bad loans in the Indian banking sector, at this stage, is around Rs 17 lakh crore, much higher than what is reported by banks and estimated by the central bank and the government. Chakrabarty said that this fraud should not be seen in isolation, as there are enough lapses in the system about which alerts have been sent. “This is a result of the long-followed poor risk management systems and inefficient auditing practices. Everyone has to understand that there are no short cuts. There needs to be a proper risk-based audit and supervision in place to prevent such frauds, otherwise our country will continue to suffer,” said Chakrabarty. The irony is that the government, instead of focussing on putting such a system in place, is now busy in the dangerous game of privatising banks, based on suggestions of corporate groups such as FICCI and ASSOCHAM.
All India Bank Officers Association head Thomas Franco said, “The Modi government should learn a lesson from this scam and strengthen the security mechanisms of banks. But the government instead is planning for privatisation of public sector banks which is risky and harmful. Chief economic adviser Arvind Subramanian has very clearly stated this. This is against the country’s economic sovereignty. The RBI and PMO are responsible to answer for the PNB scam. The country should be told when whistle-blower Hari Prasad wrote to the PMO about this scam in 2016, why was not any action taken? That is where the fault lies. Why after all, does the RBI keeps changing rules and regulations to benefit the corporates? The Parliamentary Standing Committee gave strong recommendations to improve security mechanisms and reduce NPAs in February 2016. The government should tell the nation why it has not done so till now.”
It was but natural for a political slugfest to break out as a result of this scam, but in the confusion created by the allegations and counter allegations, truth has become a casualty. According to former finance Minister Yashwant Sinha, the Nirav Modi scam has not only exposed the frailties of the banking system in the country but also sullied the image of the Modi government. I He has asked 10 questions to finance minister Arun Jaitley. For instance, since all this involved foreign exchange transactions, how did it escape the attention of the RBI? It has been claimed that Nirav Modi had set up 200 shell companies through which these transactions were conducted. How does this fit in with the government’s tall claim that almost all the shell companies were closed in the months following demon-etisation?
Former vice-president of All India Bank Employees Association and con¬venor, Investor Action Forum Charitable Trust, Mumbai, Vishwas Utagi alleged that people at the top levels were involved in the PNB Scam and that the role of RBI officers was also questionable. “It is very easy to make junior employees responsible, but the real game takes place at a higher level. That needs to be exposed,” he alleged. Utagi explained that “this scam involves non-fund business. This is not loan. This is not even an NPA but converts into an NPA.” Utagi made it clear that if probed properly, many more Nirav Modis can be exposed.
The disclosures of the last week has put the credibility of our entire banking system at stake. The notorious nexus of politicians and top cor-porates are challenging the basic ethos of our democracy. As managing editor of Money Life Sucheta Dalal alleged, “The RBI had 100 per cent information that there is a problem with jewellery companies... the BJP govt in its arrogance believes that it can do whatever it wants and is not answerable to people.”
Mr Prime Minister, the country is waiting for you to break your niravata (silence) on the banking frauds and reassure us all that our banking system is safe.