Was PC behind the 25-fold procurement of Banking Software in PNBScam?

The scam at Punjab National Bank involving Nirav Modi points to collusions across several entities

Has Nirav Modi inadvertently unearthed another scam in procuring software?
Has Nirav Modi inadvertently unearthed another scam in procuring software?

I have been working on various types of Software throughout my professional career. Heck, I even have a patent or two in Software. I know how hard it is to replace an existing, robust software product that has served the customer well for many years. Then explain this to me… Laser Soft’s Core Banking solutions product, that cost the customer Rs.40 crores over a period of 12 years, including maintenance and support, was replaced by allegedly a lesser capable, more expensive software called Finacle by Infosys that had a one-time cost of Rs.380 crores and would end up costing the customer around Rs.1000 crores over a period of ten years. Yes, the big banks of India replaced a perfectly functioning software product with another that cost 25x (25 times) the price! If this happened in the United States, the entire Corporate Suite of the buying company will be sacked and the company will have shareholder lawsuits by the dozen! But this is India, most banks are Public Sector owned and the chief executive most likely did not know what “benefits” he or she was getting from the new product.

The inspiring story of Suresh Kamath

Suresh Kamath of Laser Soft made his mark as an entrepreneur who was interested in creating employment opportunities to thousands of people[1]. He started with Rs.200 and five people in 1986 in Chennai and after 23 years of growing it, sold his company to Polaris Software in 2009 for Rs.52 crores ($11 million) in an all-cash deal. During this time, he built up an impressive clientele of Banks to whom he sold Core Banking Licenses at a cost of INR 3.5crore (35 million) and these Core Banking licenses were deployed in thousands of branches. The software Laser Soft sold was robust, complex and contained several checks and balances to ensure that no errors slipped through.

At the time of acquisition, Laser Soft had proven solutions in Core Banking, Trade Finance, Treasury, Cash Management, Mutual Funds and Loans serving over 50 customers including leading banks such as Corporation Bank, State Bank of India, ICICI Bank, Mashreq Bank, Catholic Syrian Bank, Andhra Bank, EXIM Bank of Tanzania and KEP Trust, Kosovo. The solutions won several Best Technology Awards consistently for their ability to deliver high-performance banking at the lowest total cost of ownership[2].

Why was Finacle bought?

Perhaps the geniuses who made the decision to buy this software can explain this question. When a replacement product costs 25 times the product it is replacing and does not have simple checks and balances, it can only mean that there were other factors in play while making this decision. What factors you ask? Over-invoicing a product is a euphemism for a bribe. I am not saying that is what happened but look at the consequences now…

A Banking Software expert I talked to said that Finacle allows a user to make a credit entry without creating a corresponding debit entry! If this is true, then god save the users!

A senior banking specialist who has been in this field for over 25 years said that Laser Soft’s offerings were robust, with high-end security features and it regulated all activities ensuring that all approvals were taken. Their only fault was that they priced it very low and the Head honchos at the big banks felt that they needed software that cost 100s of crores. A reliable source in a big bank confided in me that Finacle software has been installed on their computers and even after 3 years, was still buggy and limping along.

Who were all involved?

It is laughable to say that only two individuals of PNB were involved in this scam. Several release control mechanisms have to be executed before a Letter of Undertaking (LoU) can be issued. This kind of a bypass of the Core Banking System could have happened only with the collusion of several individuals, including key officials at the Reserve Bank of India, Ministry of Finance (such as Secretary-Banking) etc. According to this senior banker, there is no way a Secretary in FinMin would have approved it without the Minister’s approval. Who were the Finance Ministers? Messrs. Palaniappan Chidambaram and Arun Jaitley. They must explain how this happened on their watch. Dr. Subramanian Swamy, a member of Rajya Sabha echoed similar sentiments:

Are Diamonds forever? Nirav Modi may disagree.


[1] The inspiring story of Suresh KamathMay 10, 2007, Rediff.com

[2] Polaris Software Acquired Laser Soft InfosystemsMar 16, 2009, GlobalCustodian.com

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An inventor and out-of-the-box thinker, Sree Iyer has 37 patents in the areas of Hardware, Software, Encryption and Systems.

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  1. Really lasersoft is one of the best softwares atleast far far better than Finnacle. The background and window appears good in Finacle whereas as per speed, data capturing, fetching lasersoft is fast and reliable.
    in forex related transactions finacle is a failure till date whereas lasersoft is best.
    I am only the user and telling from my experience.

  2. Finacle indeed is a robust and highly scalable core banking software. The matter of credit without a debit is totally wrong and the guess made by the author is baseless. Finacle indeed is one of the top core banking product and is consistently rated on the top by most if the leading analysts of the industry. There is no need to pull in Finacle into this matter as all are aware how the things happened at bank

  3. With due respects to pgurus, this one is a poorly written article without facts. Dont know whether lasersoft is a friend, if its so robust why it was replaced in overseas banks too. Core banking software sales is based on mindshare. Now there is no need to do a huge transformation as banks focus on digital.

  4. I am employee of laser soft and we are not the vendor of the core banking system. Request the author to publish the correct vendor of the legacy software prior to infosys. More over the swift messages were not entered in the CBS which has led to the issue.
    The details provided about Mr.suresh Kamath is correct. And our software is successfully running in Reserve bank of India and ppt of other central banks across the globe.

  5. Just wondering, what would have happened if demonitization had not happened and all these scams had taken place?

  6. Too much reliance of Auditors on the IT system generated reports is another reason for such scams. Today most organisations rely on IT generated reports and there are many rogues who can conveniently manipulate the IT reports. Auditors must also use their common sense and the “sixth sense” in detecting the crooked transactions.

  7. I think it was not a software issue. AS FAR AS I KNOW, The issue was about bypassing the core banking software. The LOC were not entered in the Core Banking. It has not reflected as contingent liability in the books. If reflected, the Auditors would definitely asked for the security, and reported deviation if any.

  8. Sir, on top of it, every bank branch has Concurent audit, The audit on day to day basis by a CA firm / ICWA firm or by Retired AGM levels of the same bank. This concurrent audit firm staff will physically be present for 20-24 days in a branch. She/he used to review the swift monthly total Versus cbs monthly total recon.
    Whenever on due date the LOU are paid to foreign bank, the foreign bank will intimate PNB branch (then only the credit limit will be adjusted/available for new LOU’s). At that time the foreign bank will mail to branch cc to HO cc to Divisional office, cc to Forex cell. So its almost impossible that only 3 junior level staff could hide this account totally from main books/ main system.
    Also for every foreign remittance, Banks insist Form15CA, Form15CB to be digitally signed by an external Chartered accountant, and these both forms are to be uploaded periodically in Income tax website. so there are many ways are there to catch these huge transactions.

  9. Informative article, but the title could have been Laser Soft v/s Finacle or something. Finacle is used by banks world over and by most of the banks in India, public sector + private.

  10. Every word in here is very true… the person who is in banking & IT sector I confirm this n it’s also a security vulnerability which can destroy whole nation. The finacle software is very very vulnerable to attacks, the foundation of the software is so porous that even when the account is freezed the software allows the particular account holder to take amount from ATM.

  11. What the people of India look forward to today is a safe banking system wherein their money is safe , secure and yielding. The society is not interested anymore in accusations and counter-accusations.

  12. I was reminded today whilst reading an article about the 1996 Indian Bank scam in which the then Chairman/MD is still an accused, that PC asked the then Prime Minister Deve Gowda to go slow on the Indian Bank scam. There seems to be a pattern emerging when it comes bank scams and PC….the Modi Goverment must look into all the bank scams vis-a-vis PC.

  13. Why Nirav Modi, Subramanian Swami has been crying horse against many financial and economic fraudsters, but no one, especially Jaitley is listening. I think Mr. Jaitley is power unto himself, not answerable to PM, let alone public of India. If BJP is to lose in 2019, lot of blame will have to be shouldered by Jailey.

      • Elimination of scam Gress will take time.Why Modi should wait till such time.There are enough proofs against PC,NDTV,Vadra Sonia etc.and Swami is fighting a lone battle without Modis support.This is not good thing for Modi.Jai Italy seems to help all these rogues.But surprised why PM does not take action and put these rascals in Tihar? Really multi million question.

      • Very sensible reply.
        If there is a black sheep….remove regardless if affiliations and “supposed” to be power ” unto him”.

    • Under NDA I think Mr Modi reports to Mr Jaitley and in turn Mr Jaitley reports to PC and Madam.I will never excuse myself for voting Mr Modi.


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