Decoding the PNB loot spin

When a scam of massive proportions is unearthed, it is bound to become a political issue. But even by that measure, the amount of political mud that was slung following the Punjab National Bank-Nirav Modi revelations has been enough to bury the actual issue. As far as political spokespersons and the TV news channels are concerned, this is a Bharatiya Janata Party vs Congress matter, rather than a deeply disturbing failure of India’s banking and regulatory systems.
Sure, the latter has been mentioned – how can it not be when the country’s second-largest public lender may now have a Rs 11,400 crore hole in its balance sheet? But many would much rather talk about what this means for the other Modi, the one whose first tenure as prime minister is entering its final year.
Nirav Modi and associated companies are accused of getting fraudulent Letters of Understandings, essentially bank guarantees, with the help of crooked officials from PNB. A full explainer of how the scam worked is here. On the face of it, actual political connections to the massive scam are quite scarce.
Modi is a famous jeweller and well known in high society circles both in India and abroad. But there are no political people involved in any of the companies, at least based on the reporting so far. Punjab National Bank, on its part, is a state lender but the bank has so far insisted that this operation was the work of crooked employees within one single branch. It is possible then to completely ignore the words BJP and Congress and still have many, many questions about what transpired between PNB and Modi and what that means for India.
But of course, general elections now seem to not be far away and even something as simple as the key suspect’s last name matching with the prime minister’s is enough for many to scout for any possible political angle to the story.
Below is a list of ways the BJP and the Opposition, with the Congress at the forefront, are trying to spin the case.
Lalit Modi. Vijay Mallya. And now Nirav Modi. The impression that alleged scamsters somehow manage to leave the country before the authorities swing into action had already gained currency through the quick escapes of businessman Mallya and former cricket czar Lalit Modi. In those two cases actually, there were questions to be raised over how Mallya managed to leave so easily and whether Lalit Modi got government support to travel despite being wanted in India. In this case there is less of an actual claim: Nirav Modi seems to have left before a First Information Report was filed, so there may not have even be cause to prevent him from leaving. Yet since it fits into the narrative and is easy to allege, it has become a part of the spin.
The Opposition has sought to argue that such a large scam in a public sector bank could not have happened without someone in the government knowing about it. Some have also brought up a letter written to the Prime Minister’s Office back in 2016 alerting it to the possibility of a scam. The Shiv Sena has also piped in to say Nirav Modi is a donor to the BJP. The Congress also pulled out an old video in which “the prime minister was heard referring to ‘Hamare Mehul Bhai’ while speaking at a public event on gold monetisation scheme” announced by the government in 2015. Add this to the picture of Narendra Modi with Nirav Modi at Davos a few weeks ago, and you have a neat set of allegations. In reality, it is hard to say what each of these means: The size of the scam is large, but that does not immediately mean the government knew, it is likely the PMO gets many letters like that one, and so it might just reflect negligence. While the BJP attempts to explain away Nirav Modi’s presence in the photo are quite silly, the prime minister cannot be held responsible only for being in the same picture as the man who is now a fugitive.
In some ways this is the most interesting one. Congress President Rahul Gandhi has sought to argue that through demonetisation, Narendra Modi took “money from people’s pockets and put it into the banking sector and now his friends and cronies are stealing it from the banking sector”. Despite demonetisation causing widespread distress and a huge economic shock, the Opposition was unable to turn the unhappiness into dissatisfaction with the government, because it was sold as a moral project.
News over the last year that it amounted to little has soured people on the idea but not enough for it to remain a political issue. Now Gandhi is trying to recast it as an exercise by which money was taken from the poor and given to the rich. It is not an easy line to push, but if it stuck it would undercut the moral argument built into demonetisation. Here the argument only works at its broadest interpretation – that demonetisation did speed up financialisation, and so more money is available for banks to use or misuse – though considering this scam is said to have begun in 2011, it clearly did not need the note ban to have happened.
In response, the Bharatiya Janata Party has seemed even more desperate to find some way of washing its hands of one of the biggest scams to hit the banking industry.
Union Minister Prakash Javadekar brought up an email sent by Dinesh Dubey, an executive director at Allahabad Bank, who said that loans were given to Gitanjali Gems, part of one of the companies accused in this matter, despite his dissent note against it in 2013. Dubey says his note was ignored and Allahabad Bank lent money to the company despite outstanding loans on the books. The BJP has claimed this proves the scam could have been prevented there, which is unlikely because it allegedly took place at another bank – Punjab National Bank – and through fraudulent means. Moreover, if Dubey’s dissent had been that pointed, should it not have come to light under the new dispensation in 2014?
BJP narrative #2: Original sin
The party trotted out Defence Minister Nirmala Sitharaman to say that the scam, as admitted by Punjab National Bank’s managing director, began in 2011 and so originally took place when the Congress was in power. “Instead of explaining how it happened during their period, they’re casting allegations,” she said. As many have reported, however, the bulk of the allegedly fraudulent LoUs were issued or renewed in 2017-’18, well into Narendra Modi’s tenure.
BJP narrative #3: Congress was the landlord
Subsequently, the BJP seemed to have gotten even more desperate for an angle. Sitharaman, in the same press conference, mentioned that Rahul Gandhi attended a promotional event of the jewellry group. She then said Anita Singhvi, wife of Congress leader AM Singhvi, was a director of one of the private holding firms that rented out property to one of the companies involved in the case. “Connect the dots”, Sitharaman said, as if to suggest the landlord ought to be responsible for tenants’ actions.
Across both sides of the divide, the attempt to politicise the matter has not been built on stable ground, relying instead on a lot of spin.
But the Opposition has one simple trump card: It happened on the BJP’s watch. This is not necessarily an accusation that the BJP had anything to do with the scam, though the Opposition is trying to insinuate that as well. It is simply a reminder that Modi came to power saying he doesn’t want to become the prime minister, and instead wants to be India’s chowkidar, watchman, who would protect the nation’s wealth.
However the BJP tries to spin it, this scam has emerged well into Modi’s five-year term. Coupled with the Lalit Modi-Vijay Mallya jibes, this simple argument is likely to also be the most effective one and, considering solving banking sector regulatory woes has been one of the government’s stated aims, probably one of the most valid arguments too.