Govt initiates action for removal of Allahabad CEO, 2 PNB directors
The government today initiated the process to remove Allahabad Bank CEO Usha Ananthasubramanian and two executive directors of Punjab National Bank in connection with USD 2 billion fraud perpetrated by diamond jeweller Nirav Modi in connivance with PNB officials.
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 board of Allahabad Bank will meet tomorrow and is likely to divest its CEO and MD Ananthasubramanian of all powers. She was the managing director of PNB till May 5 last year.
The PNB fraud, which spanned over several years, started in 2011.
Briefing reporters, Financial Services Secretary Rajiv Kumar said there is a set process for removal and dismissal of directors from the board of banks and that has been initiated.
The government holds a little over 62 per cent stake in PNB and close to 65 per cent in Allahabad Bank.
Earlier in the day, the PNB board convened an emergency meeting on the insistence from the government's nominee director.
In a filing to BSE stock exchange, PNB said, "In view of the recent developments, the board of the bank in its meeting decided to divest the functional powers of Executive Directors, K.V. Brahmaiji Rao and Sanjiv Sharan and sought their replacement from the Department of Financial Services." "The (PNB) board has decided to divest EDs of the functional and financial responsibilities and have also requested the government to replace them," Kumar said, adding the government is committed to taking strict action against erring officials.
The CBI filed its first chargesheet in the country's largest financial scam worth over USD 2 billion at PNB allegedly committed by billionaire jeweller Nirav Modi.
The chargesheet detailed the alleged role of PNB's former chief Ananthasubramanian in the scam. Ananthasubramanian was the MD and CEO of PNB from 2015 to 2017 and was questioned recently by the CBI in connection with the case.
"Today agencies have filed the chargesheet. Around 10 days ago we had asked explanations from the two executive directors at the PNB and the current MD and CEO in Allahabad Bank. This was essentially because of the fact that SWIFT and CBS integration was to take place based on the circular issued by RBI in 2016," Kumar said.
Jeweller Nirav Modi used fake letter of undertaking (LoUs) to defraud PNB of over Rs 13,000 crore in connivance with bank officials by exploiting the loophole of non-integration of SWIFT with the Core Banking Solution.
"This was the duty of the senior management to minimise the risk in the system. We issued notices and sought explantation 10 days back from top officials of these banks," he said.
Kumar said there is a set process for the removal and dismissal of directors from the board of a bank.
"One notice was issued 10 days back. Section 8 of Banking Regulation Act define how do you remove the director. We have initiated action for that (removal) also. So this is a clear message that we have to be responsible for what we do. We will only take action when we have substantive proof and not on hearsay," he said.
The government, he said, has taken a strict action which reflects its resolve to ensure the highest corporate governance in state-owned banks.
The department will not spare anyone involved in corruption and lapses, irrespective of his or her position and will take speedy action against them while honest officers have nothing to fear about, he said, adding the government would solidly stand behind honest officers.
When asked about action against two MDs named in the FIR related to loans given to Aircel by IDBI Bank, he said, "I would like to make it clear that you cannot take action only on hearsay. They are responsible person and its 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 problem is generally in the large corporate side, while branches across the country by and large are corruption free, he said.
Last month, the Central Bureau of Investigation (CBI) booked Syndicate Bank MD and CEO Melwyn Rego, who was Deputy Managing Director of IDBI, along with several others in the Rs 600 crore IDBI loan default case.
The CBI has also booked former IDBI CMD Kishor Kharat, at present MD and CEO of Indian Bank, in the loan fraud case.
Expressing faith in the banking system, Kumar said banks have a strong, robust tradition and they follow highest standard of corporate governance barring few stray cases.
"The moment I have definitive information either from the regulation side, supervision side or investigation side, the government will not hesitate in taking action to protect people's trust in the banking system," he said.
Asked about the role of government nominee director, Kumar said, the government has decided that they are not part of lending or commercial decision.
"It was practised that government directors or nominees are not part of commercial decisions, so they are not part of the committee which sanctions the loan. further we have issued a circular saying that nobody would interfere anywhere in commercial decision," he said.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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