Date:- 28th Feb 2018
THE NIRAV MODI-PNB SCAM EXPLAINED (GS 3 EONOMY)
The month of February witnessed Indian banking system getting rocked by the Nirav Modi scam. Let’s take a look at the scam in a nutshell
- To import high end diamonds Nirav Modi approaches PNB and asks for LoU
- Letter of Undertaking (Lou) is an undertaking provided by one bank to another bank, in favor of or on behalf of a customer. Simply it’s a guarantee given by one bank for a creditor.
- The LoUs issued to did not mention credit limit, enabling Modi to encash much higher amounts form foreign banks
- The LoU was issued by PNB to the foreign bank through SWIFT
- It’s a messaging platform used by banks to send messages regarding transaction to other banks.
- But PNB employees concealed the details of LoU issued by not entering it in its Core Banking System (CBS).
- And the PNB employee’s party to the scam forwarded the SWIFT message floating all standard norms.
- There is a three layered security system in the form of verification and crosschecking before issuing a LoU which was bypassed.
- And no competent authority issued these approvals
- The employees were able to utilize a loophole in the system, the bank’s failure to integrate CBS and SWIFT
- Upon receiving the Lo Ute overseas bank extended credit to Modi entirely based on the guarantee by PNB
- The fund was remitted to a NOSTRO (a bank account held by a bank with a foreign bank, usually in the currency of that country) account of PNB.
- And upon expiry of LoU Modi was supposed to pay back the amount to PNB
- And when the LoU issued expired (LoU are issued for 90 days of validity) fresh and new LoU were issued over the old ones
- And thus Modi escaped paying the amount back by rolling over LoUs the same above mentioned way.
- The scam went for 7 years and to get a perspective a total of 151 LoUs were issued in 2017 alone.
- And as per on going estimates PNB has suffered a loss of 1200+ rupees.
- Weather Modi pays it back or nor PNB has to honor its LoU to the oversees bank.
There are also some loose ends which has not been clarified yet
- Even if integration between CBS/SWIFT is not implemented as with PNB banks has to do that separately for NOSTRO accounts. Why didn’t then the scam be identified at this stage ?
- How cound’t they take notice of when such large funds were remitted by overseas banks into the Nostro account of PNB.
- Why didn’t the external auditors identify the scam?
Issues like these reflects on the systemic issues faced by Indian Institution whether it be banks or any other ones. So it is important to rectify the real issues and not just caught up in the monetary part alone.
MALDIVES REJECTS INVITE FOR NAVAL EXERCISE (GS 2 IR)
Tensions between the Maldives and India have hit a high point as the island nation has declined New Delhi’s invitation to participate in the biennial naval exercise Milan.
Maldives has not given any reason for its decision
The exercise comes in the backdrop of China’s growing military presence and activities in the Indo-Pacific region and Maldives decision becomes more important due to its new found friendship with the Chinese
MILAN is a congregation of littoral navies conducted biennially by the Indian Navy under the aegis of the Andaman and Nicobar Command.
It was first held in 1995 with the participation of just five navies. The aim of the initiative was to have an effective forum to discuss common concerns in the Indian Ocean Region and forge deeper cooperation among friendly navies
RATIONAL TAX SYSTEM SOON TO BOOST EVS (GS 2 GOVT POLICIES)
The government today said it is trying to bring out an industry-friendly new National Automotive Policy as well as a rational system of taxation for promoting electric and hybrid vehicles.
The policy is intended to help create a more enabling environment for the sector besides providing stability which overseas investors seek.
The world is witnessing a fast technological leap towards commercialization of Electronic vehicles for clean and advanced mobility.
Electric vehicle sales are low in India because of few available models and a lack of charging infrastructure
Nitin Gadkari, minister for road transport had earlier outlined the government’s ambitious plan to shift to electric vehicles by 2030, giving rise to voice of concern from the automobile industry.
And this decision has created uncertainty in the automobile industry for the past year, although several companies had outlined their strategies for EVs or lobbied the government to drop the idea.
Adoption of electric and shared vehicles could help India save $60 billion in diesel and petrol, along with cutting down as much as 1 gigatonne of carbon emissions by 2030.
EPFO LAUNCHES FACILITY TO LINK AADHAAR WITH PF ACCOUNT (GS 3 ECONOMY)
Retirement fund body EPFO has launched the facility of linking Aadhaar with universal account number.
The facility can be accessed from EPFO link in the UMANG mobile app.
This new facility will help the members to access EPFO services speedily and easily
Things you should know about
- UAN stands for Universal Account Number. A UAN is generated for every provident fund contributing member. It acts as an umbrella for the multiple member IDs. The idea is to link multiple Member Identification Numbers (Member Id) allotted to a single member under single Universal Account Number.
- EPFO mandatorily requires for its members to link their UAN with respective Aadhaar numbers in order to avail its online services like checking PF account balance, submit PF claims or for withdrawing some money from the PF accounts
- The new facility is in addition to the existing one on the EPFO website for linking UAN with Aadhaar.
- UMANG or Unified Mobile Application is an app launched by the government to provide access to various government services at one place.