Will the NiMo case fizzle out like many others?

After a full week of investigations and accusations on the Rs 11,300-crore Nirav Modi scam, we are no closer to finding all those who were responsible. Clearly, bank officials and their political godfathers are corrupt. Clearly, our banking systems and supervision are full of loopholes. But we have no big names yet.

Gitanjali Gems and some other companies are under the scanner along with Nirav Modi. A huge bad debt of over Rs 3,000 crore by pen-maker Rotomac has suddenly been revealed. Readers are outraged that these businessmen could borrow such huge sums, often without collateral. Who is guilty?

Well, every finance minister is responsible for major scams under his watch. No finance minister can be expected to supervise every bank deal, but the buck stops at the top. This applies both to the current finance minister Arun Jaitley and his predecessor P Chidambaram. Nirav Modi made merry during both their tenures.

Next comes the Reserve Bank of India, direct supervisor of banks. Given the long history of bank scams, the RBI should by now have devised ways to quickly detect and abort such frauds. In the Nirav Modi case it found nothing amiss. It is supposed to watch high-value foreign exchange transactions, but saw nothing. Its bank audits found nothing.

Next come the chairman and board of PNB. No large loans can be sanctioned without their clearance. Rules are supposed to ensure that no underlings can sanction large sums on their own. These rules and their implementation have failed. Their internal auditors were fast asleep. So too were external auditors.

Worse, the PNB management failed miserably to follow anti-corruption guidelines on staff rotation. No manager is supposed to stay in a post for more than three years. The fact that a crooked deputy manager, Gokulnath Shetty, managed to stay in his post for seven years and keep rolling over loans to Modi without collateral, is outrageous. Did Shetty have political godfathers who helped him escape the normal rotational rules? That cries out for investigation.

The bank’s financial systems were so weak that Shetty was able to bypass with impunity the normal SWIFT system tracking foreign remittances. Nobody noticed the nonmatch between the bank’s books and the huge sums Shetty remitted overseas. Negligence or collusion?

The Congress is accusing the Modi government of corruption, and of letting the big fish escape abroad. The BJP says the whole scam started under Congress rule, and the BJP is now cleaning up the mess it inherited. It will take time to unearth the truth. Cynics will note that businessmen hedge their bets by paying off politicians from all parties.

Do not rule out the possibility that this matter will fizzle out like Bofors, the Jain hawala case or so many others. Our politicians, CBI, ED, and courts are simply not equipped or interested in tracking down and convicting the high and mighty. Most criminal cases fail. Most accused persons die of old age before being convicted beyond all appeals. I suspect this will happen to Vijay Mallya too, even if he returns to India.

Few readers may remember a bank scam in 2014 where the sums laundered surpassed Nirav Modi. Then, Iran was still under US economic sanctions, and India paid for Iranian oil in rupees through a UCO bank account. The cost of imports was partly offset by Indian exports to Iran, for which payment was made through the same bank account.

What followed was bizarre. Nine foreigners from Iran and Azerbaijan entered India on student visas and set up a string of shell companies. They then produced bogus documents for non-existent exports by these shell companies to Iran, and collected advance payments from UCO bank (at least Rs 946 crore, according to the Enforcement Directorate). The sums were diverted to entities in Dubai and Iran.

The ED estimated the total sum laundered at Rs 20,000 crore. It tracked some of this to a Surat diamond trader and hawala operator, Afroz Hassan Hatta, accusing him of laundering Rs 5,000 crore in just two months. Hatta and others were arrested. UCO Bank says that while there may have been laundering, it ultimately did not lose any money. Till now nobody has been convicted. The public has forgotten the matter.

In the current case, PNB has lost huge sums. Only a fraction of that will be recovered from seized assets. But does the track record of the CBI, ED, public prosecutors and courts give us confidence that the guilty will be found and convicted? Only an incurable optimist will think so.

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