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Indian institute call for actions over alleged fraud at state-run bank

Following the alleged fraud of state-run Punjab National Bank (PNB), which came to light 14 February this year, the disciplinary directorate of The Institute of Chartered Accountants of India (ICAI) has launched an investigation, urging PNB, the Securities and Exchange Board of India (SEBI), the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) to share details of reports and findings in regards to the alleged frauds.

The alleged fraud took place at a single Mumbai branch of PNB and pertains to a number of bank guarantees issued by the bank to jewellery companies owned by Nirav Modi and his uncle, Mehul Choksi, so that they could arrange loans from overseas lenders.

The fraud is said to be in the region of $2bn and to have been actioned by a small number of employees based at the Brady House branch in Mumbai.

The ICAI has set up a group to study the issues in PNB bank matter and suggest remedial measures and improvements in the banking system.

The first meeting of the group took place on 23 February were officers of PNB were called to produce copies of all related documents to the alleged fraud.  The general manager of PNB, Western Zone, appeared and made a statement in Mumbai.

The Directorate of Discipline of ICAI has issued show cause notice to all central statutory auditors of PNB and the auditors of Gitanjali Gems Limited, of which Choksi is the chairman, to take action against those members of ICAI who were potentially involved in the fraud at PNB.

In 2017, the central government of India appointed a high level committee (HLC) comprising of government nominee members of the disciplinary committee of the ICAI, The Institute of Company Secretaries in India (ICSI) and The Institute of Cost Accountants of India (ICoAI) to suggest amendments to The Chartered Accountants Act, 1949 for strengthening the disciplinary and oversight mechanism of all three Institutes.

The ICAI has said that until the disciplinary inquiry is concluded, and the role of all those involved, it would not be ‘prudent’ to draw any conclusion against the accountancy profession within India.


By Joe Pickard

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