'Divest powers of accused,' Finance Ministry directs PNB, Allahabad bank

Billionaire jeweller Nirav Modi is at the centre of the over $2 billion PNB fraud

Billionaire jeweller Nirav Modi is at the centre of the over $2 billion PNB fraud

PNB was hit by a almost Rs13,000 crore scam allegedly perpetuated by jewellers Nirav Modi and Mehul Choksi in connivance with some bank employees.

The Finance Ministry on Monday began the process to remove Allahabad Bank CEO and MD Usha Ananthasubramanian from the post after the CBI filed a chargesheet on her alleged role in the over Rs 13,000-crore PNB scam earlier in the day. Besides Nirav Modi, the CBI document also mentioned the names of top PNB executive directors Brahmaji Rao and Sanji Saran and general manager Nehal Ahad.

The announcement on Tuesday is the first financial results by PNB after the fraud disclosed by the bank in February.The Board will be meeting today to approve the financial results.

Apart from Ananthasubramanian, the government has also initiated the removal of 3 board level officers and 2 ED officers of PNB, Kumar said. She is now the CEO of another state-run lender, Allahabad Bank. PNB issued a total of 1590 LoUs to group firms of the two businessmen since 2011 and had also announced in March that it will honour all these LoUs.

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All of the PNB ex and current officials have been named on grounds of violating RBI's directive on SWIFT messaging used for inter-bank communication. The chargesheet detailed the alleged role of PNB's former chief Ananthasubramanian in the scam. She was the managing director of PNB until May 5 a year ago.

Meanwhile, RBI advised Allahabad Bank to restrict expansion of risk-weight assets and to reduce exposure to un-rated and high-risk loans after it reported Rs 3510 crore net loss in the fourth quarter, largely owing to the exposure it had on the PNB-Nirav Modi fraud.

"For removal and disciplinary action, there's a set procedure, under Section 8 of the Nationalised Bank Schemes 1970. However, it is negligence and not fraud but action needs to be taken to show that someone is accountable", said Ashvin Parekh, who runs Ashvin Parekh Advisory Services, a consultancy firm. "The departmental inquiry will continue against them separately", he said. "They are responsible person and it's only a few who are into this kind of thing otherwise by and large bankers have contributed to the economic growth of the country". The stock exchanges had asked a query from the bank asking if its CEO was charged by CBI in the PNB fraud.

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