Gokulnath Shetty, the PNBBSE official at -2.10% at the center of the 11.3 billion rupee scandal at the Punjab National Bank, was among the two people arrested on Saturday when detectives intensified the fire on Nirav Modi and his associates.
Shetty, former deputy director of the National Bank of Punjab, and Manoj Kharat, have been described as the “one-stop shop operators” of the scam that is now being advertised as the largest in the banking history of India.
The police also arrested a third person, Hemant Bhat, who, according to the sources, is probably the “authorized signatory” of the companies linked to Modi.
The mysterious stay in the transfer
Shetty must have been sent at least twice during his seven-year tenure at the Brady House branch in Mumbai and the administration is now dealing with the mystery of who stopped or could not start his transfer.
Shetty issued letters of commitment (LoU) without the approval of higher authorities on behalf of the companies of the Modi and Mehul Choksi group for seven years. He was one of the employees authorized to use the SWIFT messaging system to send LoUs.
“Shetty was due to be moved sometime in 2013. However, considering that she occupied a specialized position, the central office may not have initiated the transfer or someone played a role to make sure it was not transferred for another two years,” said one. person from the GNP central office. “The mystery really is why it was not transferred in 2015 at the end of five years.”
How Shetty lost his cover
The fraud, which has been going on since 2010, came to light in January after Shetty retired. Subsequently, the claims of Allahabad Bank, Union Bank of India and Axis Bank for reinvestment of LoUs were not respected by the new staff member who oversees the accounts. Shetty was impossible to track since then.
According to the guidelines for state banks, a manager must be transferred every three years and managers who occupy specialized positions can continue for five years. Rotating staff in sensitive positions, including the one that Shetty had, is a vital risk management measure in a bank. Shetty had only had one promotion in her 36 years of service. He joined the bank just around the second phase of nationalization. In 1986, he was promoted from employee to manager. Thereafter, Shetty did not opt for a promotion.
“PNB is investigating the practice of human resources and an internal audit is being carried out, which will analyze all these issues,” said a person familiar with the development who did not want to be identified.
But there were only 3 people in this racket?
What seems intriguing is that the letters issued by Shetty and her associates were accepted by other banks that never crossed anything, even accidentally, for years. Worse yet, the LoU, by own admission of PNB, flagrantly violated the RBI limit of 90 days of credit by converting it back to one year. However, not a single bank of loans abroad realized this. There were 30 of them.
A LoU is a bank guarantee, a kind of golden promise that the bank issues to clients, which they can use to obtain money from foreign banks. It is something that must be taken into account somewhere, even if it is an unfunded element.
Is it possible that a branch that has accounts for a list of the billionaire’s signature escapes close scrutiny? Modi was a rich waiter from Forbes. Not a single external auditor, four at a given point in time, discovered that something was wrong in reconciling transactions and commitments.
Apparently, the GNP never tightened its internal controls and mechanisms of guarantees and commitments, despite being among banks, deceived by Winsome Diamond Group, another jewelery firm that breached letters of credit (LoCs) in the amount of Rs 6,800 million rupees. PNB had the highest exposure at Rs 1,800 crore.