Money & Banking

Top bankers to discuss scam at IBA meet today

K. R. Srivats | | Updated on: Feb 16, 2018
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Stormy session likely as PNB says overseas branches of other banks didn’t follow the required norms

Brace up for a stormy meeting on Saturday when top honchos of the Indian banking system meet in Mumbai under the aegis of Indian Banks’ Association (IBA) to discuss for the first time the ₹11,300-crore Nirav Modi scam perpetrated on PNB.

“The Nirav Modi scam will be the primary agenda for the IBA meeting,” sources in the banking industry said. IBA is a self-regulatory body for the banking industry. At their meeting, bankers are likely to thrash out the issue of their respective liabilities and responsibilities on account of the “mammoth” letter of undertaking (LoU) fraud at PNB.

Already, PNB has said that there were lapses on the part of the overseas branches of Indian banks in not following certain internationally accepted norms for acceptance of such fraudulent LoUs. Among the lapses are entertaining “LoU” with validity of over a year when the normal rule provides that an LoU should not be valid for more than 90 days.

PNB has said that it would be prepared to accept liability only to the extent advised by the RBI after investigations are completed by the law enforcement agencies.

Tarun Bhatia, Managing Director, Investigations and Disputes, Asia Pacific, Kroll, a global consulting firm, told BusinessLine that the recent fraud in PNB reflects a major process failure and highlights the importance of operational risk and its impact on bank performance.

Pankaj Dutt, Managing Partner-India and South Asia, Alexander Hughes, said that the problem with Indian state-owned banks stems from the relative negligence which their boards and managements place on the risk management function.

CA Institute steps in

Considering the massive irregularity perpetrated on PNB, the CA Institute on Friday said that it has “suo moto” triggered its disciplinary mechanism. The CA Institute, as regulator of the audit profession, has now written to the bank concerned (PNB) and also all other investigating agencies (SEBI, ED and CBI) requesting them to provide requisite details of their investigations in the PNB matter.

A high-powered group has also been constituted to study the systemic issues in the PNB matter and suggest remedial measures, said a statement issued by the Institute.

Published on February 16, 2018

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