Shortly after a US$2 billion (S$2.6 billion) bank fraud was uncovered last month (February) at India’s state-owned Punjab National Bank, a picture emerged of Prime Minister Narendra Modi with the alleged fraudster.
The photo showed PM Modi posing at the World Economic Forum in Davos on Jan 23 with a large business delegation that included billionaire jeweller Nirav Modi, who is at the centre of the unfolding scandal.
That was enough for opponents and even one of PM Modi’s coalition partners to question his commitment to rooting out corruption – a key part of his pitch to voters.
Government officials said the jeweller was just part of a separate, non-official business delegation, and that the prime minister had only stopped by for a photo.
Still, the scandal may already be having an impact. On March 14, PM Modi’s ruling Bharatiya Janata Party (BJP) lost three by-elections in the populous and politically crucial states of Uttar Pradesh and Bihar.
While investigations continue into India’s biggest-ever bank fraud, the by-election results show the BJP’s reputation is on the line as it faces several state-level polls and a general election over the next 12 months.
Riding to power on a pledge to unearth unaccounted wealth, PM Modi justified a move to ban 86 per cent of the country’s currency in November 2016 on an anti-graft push, a policy that hurt the economy due to its botched implementation.
“This case could well deliver a blow to the Modi administration’s anti-corruption bonafides,” said Mr Michael Kugelman, Asia programme director at the Woodrow Wilson Centre in Washington, D.C.
“The government’s response will be subjected to ample scrutiny in India and beyond, not just because it has emphatically and repeatedly called for crackdowns on corruption, but because of Modi’s close ties to big business.”
Mr Nirav Modi, who has dressed actresses including Kate Winslet and Priyanka Chopra, has been accused – along with his uncle Mehul Choksi – of defrauding Punjab National Bank. The bank alleges the duo and their associates worked with some rogue employees and used fake guarantees to obtain loans from abroad. Both deny the allegations.
Though Mr Nirav Modi shares the same surname as the prime minister, the two are not related.
In addition to the photo, critics are also looking to undermine the government with a video from 2015 of the prime minister addressing Mr Choksi as Mehul-bhai – an affectionate term for brother.
Mr Jagdish Thakkar, a spokesman in the Prime Minister’s Office, did not respond to a call seeking comment.
PM Modi’s administration had formed a so-called Banks Board Bureau to improve governance standards and underwriting processes at state-run lenders. However, the bureau said it has not heard back from the Finance Ministry on recommendations made a year ago, according to a statement on March 19.—Agencies