Those of us who are thinking that the Nirav Modi scam related to the Fake Letters of Undertaking (LoU) by the Punjab National Bank (PNB) will be shocked to know that details are now emerging about the extent and depth of the LoU’s issued. Frankly, it is frightening.
A quick look at the number of LoUs issued by the Punjab National Bank(PNB), the second largest Public Sector bank, shows that these did not stop after the National Democratic Alliance (NDA) came into power. While one should not tar every LoU as being questionable, the fact that no safety procedures were put in place points to the continuation of unchecked LoUs. Figure 1 shows the number of LoUs issued by PNB since 2011 under the United Progressive Alliance (UPA) rule.
Did this stop after the National Democratic Alliance (NDA) of Narendra Modi came to power? See Figure 2 below:
It is more or less the same. Why was it so important for the Modi government to continue the status quo? Those who sang praises of the Phoren-educated Raghuram Rajan at the helm of the Reserve Bank of India (RBI) should reflect as to why all this happened under his watch. Now the blame game has started between the Finance Ministry and the RBI with each pointing fingers at the other. So who should be blamed?
To answer this question, let us look at a statement made by the then Governor of RBI, Y. V. Reddy.
Y. V. Reddy, Governor of the Reserve Bank of India (RBI), who retired in September 2008 after a five-year term, uttered a classic oxymoron at an international conference that year. Responding to a question on the autonomy of the central bank of India, he said that his reply was “The Reserve Bank of India Governor is very independent. And, I took the permission of my Finance Minister to say this…”
Enough said. The ball is in the court of the Finance Ministry and the sooner they accept their responsibility and start acting, the better for the country.
All this information came out from a question raised by Dr. Subramanian Swamy in the Rajya Sabha (see below for details):