 Hello and welcome to NewsClick. Today we are here to talk about the latest episode of fraud that has happened in the banking sector. According to the latest news, Punjab National Bank has been defrauded of 11,000 crores by a diamond merchant called Nirav Modi who has been very famous with the collusion of some of the ex-staffers of Punjab National Bank. To discuss this issue, we have here with us Mr. Banknachalam. Hello sir, welcome to NewsClick. Sir, can you give us a little background and what actually happened because the details are very complex and technical involving letters of undertaking and swift transactions. So, can you tell what is this fraud about? Nirav Modi is a diamond merchant. He is purchasing from various foreign countries and then he is making big money. He is a big man in that industry, jewelry, diamond, etc. He has an account in Punjab National Bank in Brady Road in Mumbai, a current account. He doesn't have loan. So, when he places an order with the international foreign companies, they need some comfort whether this man will pay the money because there are huge costs. So, in such cases, the bank will give letter of credit or letter of undertaking. That means the bank will say, in case Modi doesn't pay you, I undertake to pay your money. Suppose he wants to place an order for 100 crores, he should give 110 crores to the bank and then on that basis, the bank will give a letter that Modi, I undertake if Modi cannot pay, we will pay. And we will also make some charges for that. Now, without giving any security or any deposit with the bank, simply the bank official somebody, he has given a letter to the suppliers that in favor of this Modi, we undertake to take the liability. In case he defaults, I will pay. That means that the bank's cost, he has been doing business. And slowly, slowly, it has been going for seven, eight years. Now, that particular official has retired recently. Another man has come. Now, also, Modi has come and then said, no, please give me one letter of undertaking. But he has told, no, no, you have to pay the money. On that basis, only we can give. Otherwise, there is no sanction. Suppose he has a loan account, against the loan, we can give. There is nothing. So, he refused. So, he complained to head office. No, head office has come to know. Now, they have come to know up to 11,000 finder crores, such letters of undertaking has been given. Whether it is really going to be a liability, it will be seen. In case Modi doesn't pay to that suppliers, they will ask the bank, no, he has failed to pay, you give me money. At that time, bank will go out of parking to be a loss. But now it's a big risk. But the point is, what is the system? How one simple, one individual officer or official, I don't know, maybe a GM, somebody. Without anybody's knowledge and sanction, he has been giving this letter of undertaking in favor of Modi. And Modi is supposed to be a big businessman. If he wants loan, he can come to the bank and take loan. That means he is also exploiting the bank system. Some gullible officer, maybe for consideration, it will come out. He has also done. So, that is one part, the mechanism. Second part is the risk involved. Now, suppose Modi doesn't pay, now entire liability will come on the bank. Bank will lose this 11,500 crores. It means average around five, six years profit of the bank. Third point is, what is the system? When computerization came, they said, no, this will detect everything online. We will check. So now in computer, whoever feeds a computer, it is captured in the main frame system. And suppose I do some transaction as a single window operator in the front desk, evening my manager or officer will check. Similarly, the manager is doing something. Suppose I give suddenly 1000 crores loan, which I am not supposed to. It will show in the evening exceptional transactions. So if this man has done something, why it is not captured at the higher office? It could have been checked five, six years ago and found out. That means there is a lack city in the system or there is a system it is not implemented. Now everybody says one man has done. So if one man can cheat or collude in cheating the bank with 10,000 crores, the banking system cannot survive. Because we are working in one lakh branches from morning to evening 365 days. Every transaction there is also concurrent audit. Somebody from outside bank is paying, is supposed to check every transaction held in the earlier day. So what happened to that system? We are paying and there is an internal audit. Then there is an external audit. There is a reserve bank audit. There is a random audit. So this cannot be found out. That means it is not a bank at all. Why people will keep that money? It is unsafe. But one thing is very interesting sir. As you said, you mentioned a lot of checks and balances within the banking system. But the fact that there is a swift transaction that has taken place without any record within the bank and also the fact that the letters of undertaking worth 11,000 have been given without any recording the bank. How can such a large transaction not be recorded and again that no external agency has actually pointed this out? That is one thing. So if such frauds are happening despite lots of checks and balances including the checks of RBI, so does it at some point like point to collusion through political power and such things? That people are turning a blind eye despite knowing that such problems are happening. You cannot rule out. You see in this fraud and all the map, you travel the map, it will go somewhere. There will be somebody in some high place. Maybe now things will come out. So bank will have to ensure a system, a full proof system. It does not happen. If it happens then what is the check? All these things will have to come. That is why we are also demanding. Number one, per se on the transaction CBI inquiry, they must find out who is the culprit. Second, there must be a parliamentary investigation about the whole system because banks are dealing with public money. Your money, 110 lakh crores, precious money is like this. Somebody will pay and the bank will be in loss. Who will pay? Where are the laws? Already we are finding bad loans. People are not repaying. Straight bank we have seen that just to offset their losses, they are now charging for a minimum balance of 1,771 crores in three months. That means their quarterly profit is coming from common people. That you leave the thief and then burden common man. The fact that government owns this public sector bank, so what ought to be government's role in it and what has been government's role in it? Has government been lackadaisical in holding this management of banks and higher officials accountable? Both in the case of even in the issue of NPS, the burden of NPS, you have pointed out a lot of times that government failed to account this management accountable. So can you talk a little about that? Exactly because of public money, government is accountable and that is why government is keeping Reserve Bank of India as a regulator. Reserve Bank has completely failed. What are the auditing? They are supposed to be in charge of the finance of the entire country and that too when such things are possible. What is the protection for that? If a bank is having some weakness or some problem, some medicine should be given. They keep on watching and then they say no, we are sorry to inform this bank is no more. Now also they are keeping. Yesterday also, Urjit Patel has met that committee, parliament committee. He has not spoken about all those things. He is only telling no, no, don't increase the deposit insurance. That's a petty matter. So Reserve Bank, I think they are becoming an appendage and extension counter of the government of India. They must be totally independent. They have no voice at all and they are expected as and all these are happening. Today you should have come out in a statement. Don't worry, we are there. It's keeping quiet. So government including FM, Prime Minister, Reserve Bank Governor, all should make a statement. Don't worry. Money is safe. Nothing to worry. We'll catch the people. They are keeping quiet like this. That's why I'm saying that it's also systemic. It's also systematic because some people know how to cheat the bank. As you rightly said, bad loans. Some bad loans will be genuine. I can't say all bad loans are malefied, fraud, etc. But it's also increasingly we are finding that collusion, Syndicate Bank, that ex-Chairman, Jane, he was contradicted. Till now nothing has happened. It's all legal. It's all going on. Accountability is very important. Every single NIA-5s of the public government is accountable and answerable. It is not their grandfather's money. It's a public money. AIBA being the bank employee's union, do you have any particular suggestions to prevent such things from happening in the banking sector in the future? If government will talk to us, we can also discuss with them what better system, what better checks can be there. This is very dangerous. I mean, if banks are so vulnerable, people will lose faith. Already, if you know, number one, people are slowly getting apprehension. Bad loans are increasing. It was 70,000 crores. It is now 9.5 lakh crores. It may be 10 crores, 10 lakh crores like that. Money is not coming. People come to know. Kingfisher, malefied, people know. Second, because of that, I am being burdened. That also people understand. Now, straight bank, after that, minimum balance, all are coming to know. Third one now, that FRDI bill. See, that says if there is a possibility of a bank being liquidated, government says as per law, I will use public money, people's money, depositors' money. So here, bad loan will not come. Government will not recover the money. Frauds will take place. The third bank has no regulation to control it. And then, people will slowly get, I mean, they will lose, they tend to lose faith in the government bank because they are in the news. Private bank, they suppress everything. Here, it has come because it has to come public. So naturally, on the one side, the fear of the people. Other side, you are increasing the fear by bringing the FRDI bill. I think there is some method in the madness. It is not innocently this thing happened. They are their broader point that we have to privatize the bank. So bring all deputation to the banks. Banks are not recovering the money. Banks are given loan. They are not doing this. Now, frauds are taking place. So people will think government banks are useless. It is not. And now if I am government bank, then government will take the money. My money, they will use. So that means they are driving the people. And from banking, where they can go? Naturally, the savings. If saving cannot be saved in the bank, either it will be cash, which is risky, or it will flow into speculation stock market. So they want to build not a productive-based economy. They want to develop a speculation-based economy. So where are we going? Banking system is a fulcrum. It is an engine for the economic development. And if you keep all these loopholes, it is very dangerous. So in a broader thing, unfortunately today, government should have made a statement. Don't worry. It is an isolated thing. We are going to plug it. We will bring all the rules and regulations. They are telling it is nothing. 10,000 crores of risk is nothing for the government. A very high official has spoken. I am very sad about that. They must immediately come. The Reserve Bank should have made a statement. Bank Charmer should have made a statement. No, no, we are giving a complaint to FIR to CBI. They will investigate. CBI case will go on for years and years that by the time that man has retired. So I don't think it is acceptable to them. There is also an allegation that now Nirav Modi is not in India, that government has not taken strong action enough that he should be kept in India and immediate action should have been taken. So do you think there is some kind of lackadaisical attitude and all this? Definitely. There must be some link. If you really probe, there must be some political nexus. Otherwise, how he will get the courage to do this? I don't think it is just some bank fraud, because of the amount it looks big. But the way things are happening, I think government has to take a view. But they are completely silent. A parliamentary committee should be brought. How banks are working? If there is anything wrong with the parties that are banking functioning, how to plug the loophole? We will also contribute. They think we don't know anything. We are working the bank. Government can talk to us. They think they are the monopolist of the entire wisdom reserve bank. And that's why we find IBC is not helping. Nothing is happening. We are going to lose more and more money every this quarter. All the banks, the same government said, straight bank is such a big bank after merger. It will become international bank, global bank, this one, that one. Why it is in loss? Same reserve bank audit has found that 20,300 crores. Bad Lord has been suppressed as a good loan. Something they have found out. It may be 20,000. It may be 2 lakhs. I don't know. So many things are possible. And reserve bank has totally failed. They are only telling that I am applying this prom corrective action. I think it is high time that the government should now apply prom corrective action, PCA, on reserve bank itself. They have lost their efficacy. If the regulator is so careless, then system will be like that. Why do you unnecessarily threaten the banks? They have already given money because of all these things and they are not able to recover. They are in difficulty. And you tell, you provide, you provide. Government is not helping. They say, if they push the accounts to this NCLT, IBC route, immediately 50%, I have to provide. Earlier it was 20%. Where is the money? Even if employees sell themselves, quarterly, where is my earning to cover these provisions? So all banks are in loss. So this is another game. Show the banks into loss and they say, no, no, they are useless. So privatize them. But I think in India, people must come to know more and more when public sector is dismantled. There must be some human cry. When banks are not working properly, they must ask the government. I think trade unions and the people, there must be some more and more synchronization. Together we have to save all these things. That's what we feel. Thank you, sir. And we will be getting back to you on the same issue in the coming week. Thank you for coming to NewsClick. Thank you very much. Thank you. Please keep watching NewsClick and NewsClick.in.