After facing harsh criticism for systemic lapses in bank's functioning that eventually led to over Rs 13,000 crore fraud by Nirav Modi and co., the Punjab National Bank (PNB) has claimed that it did not receive an important e-mail on preventing bank frauds which was sent by the Reserve Bank of India (RBI). According to a Business Standard report, the directive, issued on November 30, 2016, mandated all commercial banks in the country to strengthen their risk control mechanisms to ward off banking frauds.
Earlier this month, the RBI, while answering tough questions before a Parliamentary Standing Committee on Finance, held PNB responsible for understanding and managing risks involved while issuing letters of undertaking (LoUs). The PNB-Nirav Modi scam is being investigated by the Central Bureau of Investigation (CBI), which contends that, if only PNB had adhered to RBIs dictats, the scam could have been avoided.
In November 2016, as reported in the Business Standard, RBI sent out an email titled 'Cyber security controls - frauds related to trade finance transactions - misuse of SWIFT' to all commercial banks. Through the circular, RBI shed light on the inefficiencies of the Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) mechanism, which is a global communication medium for banks. The inadequacies were uncovered as a result of a survey conducted by RBI of all commercial banks in early 2016. The email also obligated banks to strengthen their SWIFT mechanisms, the report said.
Of all the banks which were expected to receive the email, only PNB has come out and denied its receipt. PNB, however, admits the acceptance of an email containing a password to open the November 2016 circular. The entire scenario puts forth a couple of baffling questions. Firstly, why didn't RBI examine whether or not PNB received the circular until the scam broke out in January 2018? Secondly, if PNB had received an email containing a password to the circular, why didn't it enquire about the circular?
What makes the situation more perplexing is, even if PNB claims that it did not receive the November 2016 circular, the RBI had issued two circulars in August 2016 containing certain control measures, which were also not implemented by PNB.
In May 2018, the CBI filed two separate charge-sheets against Usha Ananthasubramanian, former chief executive of PNB, KV Brahmaji Rao and Sanjiv Sharan, incumbent executive directors of PNB, and Nehal Ahad, general manager - international operations. It claims these people boosted the scam through their acts and omissions.