BLEEDING BANKS, BLEEDING INDIA … New scam sees PNB ‘defrauded’ of nearly 4000crore by Bhushan Power and Steel


NEW DELHI: India’s public sector banks are up for grabs. Bad debts – by wilful defaulters, the big sharks who refused to repay the huge amounts they took – are breaking the back of these banks, nationalised with great pomp by Indira Gandhi to prove her pro-people and pro-left leanings. After the expose of a flurry of scams in recent years, the latest finding is that Punjab National Bank  (PNB), India’s fourth largest bank,  was “defrauded” of Rs 3,805crore – or $555million – by its debtor The Bhushan Power and Steel. Two days ago, PNB reported to the stock exchange that this fraud has happened.

It said the Bhushan and Steel company has misappropriated bank funds and manipulated books of accounts to raise funds from a consortium lender banks. The scam came to light during a forensic audit. CBI stepped into the picture and filed a suo motu complaint against the company, it reported to the stock exchange. Huge frauds are not new to PNB. In June, 2017, it was referred to the bankruptcy court by the RBI, after detection of similar frauds. Now, another scam of epic proportions has come out. In between, in 2018, PNB reported to CBI that diamond merchants Nirav Modi and Mehul Choksi had defrauded the bank of the order of nearly Rs 15,000crore. Notably, the PNB posted a loss of Rs13,416 crore in the quarter ending March 2018. Despite this hit, the bank later reported a profit and claimed all was well!
The biggest banking frauds took place during the UPA I and II periods, when the political leadership allegedly influenced the high and mighty in the banking sector to liberally grant loans to their near and dear ones. They did so likely for a cut from the loans thus released, even as rules and regulations were trampled upon. The Modi government that ruled India in the past five years has adopted a restrained approach, and generally avoided fiddling with the system. However, the first term of the Modi government had done very little by way of realizing the defrauded amounts from big businesses and other fraudulent entities. Vijay Mallya of Kingfisher group for one.
Mallya says the problems in the aviation industry worked to his disadvantage. Fact was also that the playboy businessman who had one leg in politics and got himself a seat in Parliament played mayhem with the banking institutions, on which cases are ongoing. Mallya is fighting his legal battles from the UK, where he sought sanctuary, like several other businessmen who also funnelled huge sums to foreign banks and sought to escape the Indian law-enforcing network.
All bad debts are not motivated acts to defraud banks. In several cases, problems in businesses led to such situations. All the same, there are a large number of Indian businessmen who made a business out of defrauding Indian banks. The Modi government is partly handicapped by the legal systems, through which these men fight cases. But, Modi and his government – mainly his former finance minister Arun Jaitley – apparently slow-pedalled matters, complicating them further, rather than showing a will to restore the money to the banks.
Notably, bad debts were of the order of Rs 10 lakh crore a year ago. It fell to about Rs 8.5lakh crore by the beginning of this year. In the 2018-19 fiscal, public sector banks claimed to have recovered Rs 1.25 lakh crore of such strained debts, by way of resolutions under the Insolvency and Bankruptcy Code, as per official claims. Claims are that during the first half of the last financial year (2018-19), banks recovered nearly Rs 61crore of bad debts.
Several of the big frauds referred to theNational Company Law Tribunal (NCLT) have not been attended to or resolved. Among them are the Essar Steel, Bhushan Power and Steel, and JSW steel. The reasons are, among other things, legal hurdles put in place by defaulters, and influence exerted from top to slow-pedal matters. Big nexuses are allegedly at work.  On the positive side, banks recovered as high as Rs 55,000crore through NCLT resolutions. While the recovery in 2017-18 fiscal was of Rs 74,500crore, the recoveries doubled to Rs 1.25lakh crore in the 2018-19 fiscal, officials said.
India is bleeding … and the Modi government is yet to show a serious resolve to set things right. Worse, more and more scams of the PNB kind are surfacing too.
A week ago, the Serious Fraud Investigation Office (SFIO) recommended action against nine top banking executives – three of them from SBI and six from UCO bank – for their failure to check the fraud relating to the Bhushan Steel case. The 70,000-page charge sheet puts in the dock over 280 individuals associated with the fraud of nearly Rs 60,000crore. The charge-sheet was filed at a special court in Dwarka, New Delhi. Problem however is such cases go on and on, passes through various stages, and reach nowhere in the near future. The system is taken for ride, often, and the Modi government too has not measured up to face such situations in a stronger manner. –IHN-NN

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