Moneycontrol had reported that soon after the Central Bureau of Investigation (CBI) filed a chargesheet against current and former officials of Punjab National Bank (PNB) and Allahabad Bank, the Finance Ministry has directed both the banks" boards to "divest' these officials of their powers.
Following the government's directive, which came within hours of CBI filing a chargesheet in the country's biggest banking fraud case, the PNB board divested its two executive directors, K V Brahmaji Rao and Sanjiv Sharan, of all financial and executive powers. The charge sheet has been filed under sections of cheating and conspiracy of the Indian Penal Code and relevant sections of the Prevention of Corruption Act, 1988. This includes credit given out against Letters of Undertaking and amounts under other credit facilities given to entities related to the Nirav Modi group.
"At most a case could be made out for the MD and directors not observing sufficient due diligence in detecting the fraud", the director of a Delhi-based state-run bank said.
The modus operandi in the IOB case was similar to the Nirav Modi case.
At the heart of the PNB fraud was the Society for Worldwide Interbank Financial Telecommunications (SWIFT) messaging system, which is used by banks worldwide to enable cross-border transactions. This is the first charge sheet that has been filed against the absconding jeweller since the CBI and ED registered cases against him.
The two PNB executives and Ananthasubramanian did not respond to multiple calls and messages seeking comment, while Allahabad Bank was not reachable for comment.
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After the IOB fraud had surfaced, the RBI had issued guidelines and circulars to prevent such frauds in the banks which were allegedly not implemented in PNB in its entirety, they said.
The agency has not given in detail the role of Mehul Choksi in the present charge sheet.
The CBI filed its first chargesheet in the country's largest financial scam worth over Dollars 2 billion at PNB allegedly committed by billionaire jeweller Nirav Modi.
The chargesheet says that Nirav Modi, Nishal, and other public and private persons conspired for the issuance of fraudulent LoUs in favour of the three firms (named in the chargesheet) without any sanctioned limit, cash margin and making entries in the Core Banking Solution (CBS) system. The fraud was allegedly perpetrated despite the circulars issued by RBI, which was in the knowledge of senior officials of PNB.
Allahabad Bank's share prices dipped 8.6% Tuesday to Rs 40.40 on BSE.
The Financial Services Secretary further said a show cause notice was issued to them about 10-days back by the ministry.