PNB-Nirav Modi scam, the story so far

₹11,500 crore fraud rocks state-run PNB

The Punjab National Bank branch in Mumbai where the bank has detected a $1.77-billion.

The Punjab National Bank branch in Mumbai where the bank has detected a $1.77-billion.   | Photo Credit: Emmanual Yogini

more-in

Govt. swings into action, asks all lenders to ‘clean up’.

In what could be one of the biggest frauds in the Indian banking system, state-run lender Punjab National Bank (PNB) reported unauthorised transactions worth ₹11,500 crore in one of its branches in south Mumbai.

The Enforcement Directorate has registered a money laundering case in the matter, which involves Mumbai-based billionaire diamond merchant Nirav Modi. A case has been registered by the Central Bureau of Investigation against him and his business associates as well as a serving PNB official and a retired deputy manager of the bank.

In a communication to the stock exchanges on Wednesday morning, the country’s second largest lender said it had detected some unauthorised transactions in one of its branches for the benefit of a few select account holders with their apparent ‘connivance’. “The quantum of such transactions is $1771.69 million. The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land,” the communication said.

 

Stock plunges

The bank’s stock plunged almost 10% through the day and its market capitalisation eroded by nearly ₹3,900 crore by the end of trading on the Bombay Stock Exchange.

The government also swung into action with the Finance Ministry asking all the banks to carry out a clean-up exercise. Financial Services Secretary Rajeev Kumar said the government will not tolerate ‘unclean banks’ while adding that the case dates back to 2011, when a fraudulent Letter of Undertaking (LoU) was submitted to PNB. “However, the PNB case is an isolated one. The CBI is looking into the case, and 10 employees of the bank have been suspended,” Mr. Kumar added.

“I don’t think this is out of control or too big a worry at this point,” Financial Services Joint Secretary Lok Rajan said.

On January 29, Anveesh Nepalia, the deputy general manager of PNB’s zonal office filed a complaint on the issue with the CBI.

₹11,500 crore fraud rocks state-run PNB
 

Mr. Nepalia alleged that Nirav Modi, Nishal Modi, Ami Modi and Mehul Choksi — all of whom are partners at Diamond R US, Solar Exports and Stellar Diamonds, conspired with a retired bank employee and a current staffer to defraud the bank.

The retired PNB official Gokulnath Shetty and current employee Manoj Kharat fraudulently issued LoUs worth ₹280 crore to these companies in 2017, without going through the proper channels and bypassing a lot of procedures.

Bank officials stumbled on the deceitful transactions on January 16 this year, when these three firms approached the branch and presented a set of import documents with request to allow buyers’ credit for making payment to overseas suppliers.

Since there was no sanction limit in the name of these firms, the branch insisted on 100% cash margin for issuing LoUs for raising buyers’ credit.

However, the firms contested they had been availing this facility in the past, although branch records did not have details of any such facility.

A senior CBI officer said it has booked Mr. Shetty and Mr. Kharat of PNB, along with Nirav Modi, Ami Modi and Nishal Modi, the owners of the two diamond firms.

All the accused have been booked for cheating and criminal conspiracy under the Indian Penal Code along with criminal misconduct by a public servant under the Prevention of Corruption Act.

“Inquiries against all the accused are under way. We are examining the bank records and details of the LoUs issued during the period specified by Mr. Nepalia in his complaint,” the officer said.

The bank has alleged the accused employees issued a series of LoUs to the three companies in favour of Hong Kong branches of Allahabad Bank and Axis Bank.

(With TCA Sharad Raghavan and Gautam Mengle)

Why you should pay for quality journalism - Click to know more

This article is closed for comments.
Please Email the Editor

Printable version | Jan 21, 2020 10:16:32 PM | https://www.thehindu.com/business/markets/pnb-shares-fall-after-bank-finds-fraudulent-transactions-worth-177-billion/article22749241.ece

In This Package
PNB fraud: CBI court issues warrants against Nirav Modi, Mehul Choksi
PNB will come out of Nirav Modi mess in six months: MD
Post-scam, RBI stops issue of LoUs
Frauds and scams, throwback to ‘K10’ era?
Congress raises Winsome case of 'non-payment of bank loans worth ₹6,712 crore'
Deconstructing the PNB scam: a graphic story
Loose ends and unanswered questions of the PNB scam
ED attaches 41 properties worth ₹1,217 crore belonging to Mehul Choksi group
RBI conducted annual risk-based audit, clarifies PNB
Nirav Modi refuses to join probe, CBI sends terse reminder
PNB fraud now pegged at ₹12,636 crore, says CBI
Fraud amount can increase by another ₹1330 crore, PNB informs stock exchanges
A SWIFT autopsy : How Nirav Modi defrauded PNB
CBI quizzes PNB officials
Diamond trader Mehul Choksi asks his employees to find other jobs
Jaitley hints at tightening of laws
PNB fraud: ED attaches Nirav Modi group property worth ₹523 crore
Priyanka Chopra terminates contract with Nirav Modi brand
PNB fraud due to failure of internal control, says RBI
PNB fraud: ED summons Nirav Modi, Mehul Choksi
CBI approaches Interpol to locate Nirav Modi, family
The rise and fall of Nirav Modi
PNB, Nirav Modi and a fraud that went undetected for 7 years
PNB fraud: ₹5,100 cr. assets seized from Nirav Modi’s firms
PNB fraud: Loans recalled from Nirav Modi, Mehul Choksi firms
PNB fraud: ED suspects similar frauds in other banks
PNB fraud may wipe out profit
PNB fraud: We will remove this cancer, says bank head Sunil Mehta
PNB fraud: Explain Nirav Modi’s escape, says Congress
PNB fraud: Nirav Modi came to Davos on his own, says Ravi Shankar Prasad
You are reading
₹11,500 crore fraud rocks state-run PNB
All you need to know about Nirav Modi and the $1.77-billion PNB fraud
Mamata demands thorough inquiry into PNB fraud
Punjab National Bank alerts other lenders about perpetrators’ modus operandi
Post PNB swindle, ED conducts searches on premises linked to diamond merchant Nirav Modi
PNB tanks 9% on ₹ 11,400-crore scam
Next Story