NEW DELHI: The complete silence of India’s top banking regulator, the Reserve Bank of India, on the massive fraud by jeweller Nirav Modi---the repercussions of which are still unfolding---is inexplicable. Governor Urjit Patel has not said a word of assurance to tax payers---in fact nor has any one in government---that their money is safe, and there is no need to panic.

This silence has compounded the crisis with all banking fingers pointing at not just the Punjab National Bank that is in neck deep trouble with now 17 employees suspended---including the junior whisteblower---but at the RBI that has blamed what it terms as “delinquent employees” for the big fraud of Rs 11,400 crores that has been going on for at least six years if not more.

Nirav Modi, and his family left the country early January. He met up with Prime Minister Narendra Modi at Davos, but did not return to India and a week later the gigantic fraud was exposed by the Punjab National Bank, Mumbai. The government Ministers while blaming the Congress have not said a word about the current speculation about Modi’s nationality. Is he a Belgian national? Does he hold a US passport? Or is there actually an Indian passport to seize and nullify.

The story given out by PNB is that two of its employees had been issuing these Letters of Undertaking (LoU) to Nirav Modi and his group of companies. And the matter came to light only after they retired, and their replacements were approached for a similar LoU that they then found upon enquiry to be questionable.

LoUs are guarantees given by the bank for an individual/company to others he is dealing with to basically say , “if he does not pay you we will.” This guarantee is given on the basis of money of an equal, if not more proportion, that the bank issuing the guarantee is holding for the client. In this case the PNB was sending out these letters without any such surety, with the result that if Modi who is in some unknown destination abroad does not pay back the amount, PNB will lose its profits and perhaps even go bankcrupt. More so as the numbers are now increasing, with sources claiming that the figure could well tot up to Rs 20,000 crores within 24 hours as more revelations emerge.

Despite this deep banking crisis that has foreign insurance companies issuing internal directives to its branches about dealing with India, the RBI remains silent. The Citizen has formulated five questions for the silent RBI Governor Urjit Patel who has not said a word along with Devidas Tuljapurkar, Joint Secretary of the All India Bank Employees Association.

  1. How is it that the RBI which carries out a regular audit of the banks, not even smell the fraud, despite the number of years and the volume of money involved?
  2. Was the software SWIFT that was used for the fraud approved by the RBI or not for the banking sector? If not, why did the RBI not examine this thoroughly and evaluate the risk?
  3. The famous Harshad Mehta scam was because of the so called “innovative” measure of banking receipts that landed the banking sector in deep crisis. The Nirav Modi fraud has exploited the new instrument Letters of Undertaking. Is the RBI going to do something about this?
  4. In all probability the RBI will disown LoUs as it had the balance receipts. If so why did not the RBI question the banks about these guarantees, examine the risks, and create the necessary firewalls to make taxpayers money secure?
  5. Clearly the RBI has failed miserably to fulfil its role as a regulator of a vulnerable banking sector. Why is the Governor silent? Is it his case that now a ‘delinquent employee’ can help in a fraud of over Rs 11,000 crores without being detected? If so isn’t the RBI admitting a complete collapse of the banking sector, where instead of being a regulator it’s inefficiency and apathy makes it a risk to the country?