CBI questions former RBI deputy governor on PNB fraud, 80:20 gold import scheme

Apart from seeking international cooperation from Hong Kong and China on Nirav Modi's arrest, the Central Bureau of Investigation (CBI) is finding out whether any official of the RBI helped the PNB scam - worth Rs 13,700 crore - to go on for around seven years. The CBI on Friday questioned former deputy governor of the central bank, Harun Rashid Khan, who was with the Reserve Bank of India (RBI) between 2011 and 2016. Firestar Diamond owner Nirav Modi and his uncle and Gitanjali Group owner Mehul Choksi are both accused in the biggest bank scandal in India.
 
Being the central bank, the RBI conducts statutory audits of banks and keeps a check on their internal systems. Due to the involvement of several PNB officials, the banking system was misused to help Nirav Modi's companies.
 
Times of India, in a report, says that Khan was also questioned about the 80:20 gold import scheme, released by the UPA government on May 13, 2014. The CBI on Thursday also questioned four senior RBI officials, including three chief general managers and a general manager of the Reserve Bank of India (RBI), in connection with the gold import rules in 2014.
 
The government on March 12 said the scheme resulted in a windfall of around Rs 4,500 crore to 13 private entities in just six-month time as it was given a go ahead against the Directorate of Revenue Intelligence decision. Then finance minister P Chidambaram had cleared the scheme just three days before the counting of votes of the General Election. Thereafter, the Modi government had come to power at the centre.
 
In a statement, the government said the increase in gold imports had put pressure on the current account deficit in 2012-13. And after coming to power, the NDA government took a series of steps, including increasing the import duties on gold and gold products and placing restrictions. Union Law Minister Ravi Shankar Prasad had also said former finance minister P Chidambaram helped Mehul Choksi's Gitanjali Group through the UPA government's 80:20 gold import scheme.
 
The government had earlier said that at first on July 22, 2013, and then on August 14, 2013, the restrictions were modified to introduce the 80:20 scheme, under which, it was mandated that at least 20 per cent of gold imported is to be used for export. Under this scheme, only banks and PSUs like MMTC, STC, etc. were allowed to import gold for domestic use following the 80:20 formula.
 
The scheme was designed to restrict the import of gold, conserve foreign exchange by imposing export obligations, and ensure the premium from purchase and sale of gold resided in the hands of public agencies.
 
But, from May 21, 2014, the Premier Trading Houses (PTH) and Star Trading Houses (STH) were also allowed to import gold under the 20:80 scheme. "Then finance minister (P Chidambaram) approved the modified scheme on May 13, 2014, even though the model code of conduct was in place since March 5, 2014, with the announcement of the Lok Sabha Polls, and the counting was due on May 16, 2014," the government had said.
 
At the time when the scheme was announced, it was known that there was a shortage of gold for domestic use, and a premium between $100 to $150 per ounce (approximately Rs 2 lakh per kg) was being charged from the domestic customers. "Allowing private companies like PTHs and STHs to import gold provided these agencies opportunities of windfall gain, as the benefit of the high premium on gold could now be availed of by these agencies," said the government.