The wild fire set by the Nirav Modi bank fraud appears to be slowly advancing, scorching other banks – and as it turns out now, one of the most glamourized schemes of PM Modi. On 21 February, CBI registered a case against a senior Punjab National Bank official of its Barmer (Rajasthan) branch for “fraudulently” giving away 26 loans worth Rs.62 lakh under the Mudra scheme.
In its complaint, the CBI said that the official sanctioned loans “without conducting meaningful pre-inspection or physical verification of spot of business or residence and without ascertaining end use of the loan amount or creation of assets from the loan amount”.
The Pradhan Mantri Mudra Yojana (PMMY) – as it is officially called - is particularly vulnerable to such fraud because it is authorized to give loans up to Rs.10 lakh to small enterprises. The scheme, a favourite of PM Modi, doesn’t seek collateral for loans and the rate of interest is also low.
Mudra is a refinancing scheme, that is, it doesn’t involve direct lending from the govt. Loans are given by public sector banks, NBFCs, and MFIs. According to the Mudra website, Rs.4.7 lakh crore have been disbursed till now after the scheme was launched in April 2015.
The Barmer case has set alarm bells ringing in govt. circles because if other such cases come to light, the whole scheme will come under a cloud. The amount of funds involved is also huge. In this year’s Budget, Finance Minister Arun Jaitley had raised the target for Mudra loans to Rs.3 lakh crore, with the understanding that providing self-employment would be the most suitable way of targeting runaway joblessness in the country.
In Barmer, the accused official did not carry out any physical verification except in one case. The CBI alleged that loan applications “appears to be fake and prepared on table at office”. It also found that some borrowers lived 100 kms from Barmer, while the bank can only sanction loans to people residing within 25 kms radius of the branch.
In another bank fraud case that has come to light after the Nirav Modi fraud, CBI has registered a case against a Delhi jeweler for defrauding the Oriental Bank of Commerce of Rs.390 crore using Letters of Credit (LC), instruments that are similar to the LOUs used by Nirav Modi.