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Nirav Modi Scam: A Sequel To Regulatory Bodies’ Role?

Has Nirav Modi been rewarded with over Rs. 11000 crore scam for his role to constitute management of banks by proxy? If the arbitrary constitution of top management of Punjab National Bank and Bank of India in the recent past is a yardstick to gauge factors behind the scam, the answer will be in affirmative.

Photo Credit : Umesh Goswami

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Nirav Modi is accused of determining the selection of top management in Punjab National Bank and Bank of India, in particular, using his clout in the corridors of power. He often manipulated the selection of top management in these banks with an avowed objective to enjoy unscrupulous favours in return. Significantly, with intent to do a fraudulent withdrawal from the banks, he worked in tandem with the regulatory bodies that deal with the appointment of heads of Public Sector Banks (PSBs) and strategies to strengthen the capital of banks.

If well-placed sources in departments concerned are to be believed, Modi often used his political clout to the hilt to influence the management of a few banks to reap undue benefits. With his proximity to powers-that-be, authorities in regulatory bodies such as Department of Financial Services and Banks Board Bureau as well could not afford to deny diktats of Modi while constituting managements of different PSBs.   

Bank Board Bureau (BBB) that has been functioning under Department of Financial Service of Ministry of Finance is the selection body for heads of PSBs.With a view to improving the Governance of Public Sector Banks (PSBs), the Government has set up an autonomous Banks Board Bureau. The Bureau recommends for selection of heads of Public Sector Banks and helps Banks in developing strategies and capital raising plans. The Banks Board Bureau has three ex-officio members and three expert members in addition to Chairman. Except for ex-officio members, all the Members and Chairman are part-time. The BBB has started functioning from 01.04.2016 and high-profile self-styled anti-corruption crusader and former Comptroller and Auditor General of India, Vinod Rai is the Chairman of BBB at present. 

Incidentally, during its brief stint of two years as the final authority to decide appointments of top executives- including Managing Director and CEO- in PSBs, the BBB is claimed to have been ignored while effecting changes in top management of the Punjab National Bank and Bank of India in May 2017. The past bears testimony to the fact that reacting to an arbitrary decision, former Joint Managing Director of ICICI Bank, H. N. Sinor resigned as a member of the BBB within days of sudden changes in the top management of two large public sector banks -- Punjab National Bank and Bank of India. He was unhappy as the BBB was completely bypassed when the heads of the two banks were shifted to smaller banks. 

“In what he perceived as inadequate progress that the recommendations of the Bureau were making, and the resulting despondency, he had offered to withdraw his engagement with the Bureau,” the BBB had said.

But subsequently, he, however, took back the resignation. “Sinor has decided to re-engage with the activities of the Bureau, with his usual fervor and vigor,” the BBB said in a statement.

 Sources in the Finance Ministry claimed that the sudden rejigs in PNB and BOI were made at the behest of authorities in the Department of Financial Services in order to oblige Nirav Modi, keeping BBB at bay. Secretary to the Department of Financial Services happens to be ex-officio member of the BBB.

 Notably, Managing Director of Punjab National Bank, Usha Ananthasubramanian was shifted to Kolkata-based Allahabad Bank while head of Bank of India (BoI) Melwyn Rego was moved to Syndicate Bank. Consequently, Sunil Mehta and Dinabandhu Mohapatra were appointed to replace Ananthasubramanian and Rego and they have been continuing as Managing Directors of PNB and BOI, respectively, since May 5, 2017. 

Meanwhile, the Government has, however, proposed to make available Rs.70,000 crore for the recapitalization of PSBs -under Indradhanush plan- earmarking budgetary allocations for four years. The Government has infused a sum of Rs. 25,000 crore in 19 PSBs during the financial year 2015-16, and in FY 2016-17, Rs. 22,915 crore was allocated to 13 PSBs. An amount of Rs. 10,000 crore has been proposed for the recapitalization of PSBs for the Financial Year 2017-18. Although in his budget speech, Finance Minister, Arun Jaitley did not include provisions for budgetary allocation to PSBs for FY 2018-19 under the scheme, it is claimed that the Finance Ministry has approved the proposal to infuse Rs. 7,577 in six PSBs under the bank recapitalization plan for the current fiscal. 

To top it all, a score of questions that baffle the mind of many, remained unanswered; 

First, how can the Government’s regulatory authorities claim immunity from lapses on their part? 

Second, who prompted Nirav Modi and his associates to leave the country before the investigating agencies were swung into action to lodge FIR and conduct raids? 

And third, in the light of denial by the Ministry of External Affairs, if Nirav Modi was not the part of official Indian delegation during the recent visit of Prime Minister, Narendra Modi to Davos, how could he have access to PM’s entourage keeping the high-security cordon at tenterhook? 

 As such, the ulterior motive behind nexus between authorities and Nirav is obvious and the Government is required to stop beating around the bush and zero-in on Nirav Modi’s whereabouts instead.   


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