PNB fraud: Finance ministry seeks RBI’s view on lapses in banking system

The finance ministry has sought RBI’s view on failure of auditors to detect fraud, and required checks and balances to ensure it doesn’t happen again.

The finance ministry has sought the Reserve Bank’s view on the lapses in the banking system that led to the Rs 11,400 crore fraud at the Punjab National Bank and steps required to check recurrence of such incidents, sources said.

The Reserve Bank of India has been asked to explain the shortcomings in the system which allowed the fraud to go undetected for seven years. (AFP File Photo)

Department of Financial Services has written a letter to the RBI to explain the shortcomings in the system which let the fraud to go undetected for seven years, they said.

The letter also seeks the regulator’s advice on what system and processes need to be updated so that such frauds are prevented, sources added.

Besides, the ministry has also sought RBI’s view on failure of auditors to detect fraud that has been going on since 2011.

PNB, the country’s second largest bank, has reported a fraud of Rs 11,400 crore, where in Letters of Undertaking (LOUs) were fraudulently used allegedly by companies owned by billionaire jewellers Nirav Modi and Mehul Choksi.