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Nirav Modi case: Punjab National Bank admits Rs 11,000 crore fraud in South Mumbai branch

On February 5, CBI had booked diamond jeweller Nirav Modi, his wife Ami Modi, brother Nishal Modi and his maternal uncle Mehul Choksi in connection with an alleged Rs 280-crore cheating case after it received a complaint from PNB on January 29.

Written by Khushboo Narayan , George Mathew | Mumbai | Updated: February 15, 2018 7:37 am
Nirav Modi case: Punjab National Bank admits Rs 11,000 crore fraud in South Mumbai branch Mumbai: A Punjab National Bank (PNB) branch in Mumbai on Wednesday. PNB detected fraudulent transcations worth USD 1.77 bn in one of its branches today. PTI Photo by Shashank Parade

State-owned Punjab National Bank (PNB), in a regulatory filing to the Bombay Stock Exchange (BSE) Wednesday, said it had detected fraudulent transactions worth $1,771.7 million (over Rs 11,000 crore) in its mid-corporate branch in south Mumbai. At least ten employees of PNB have been suspended.

These transactions, sources said, involved a few firms promoted by billionaire diamond jeweller Nirav Modi who was initially booked by the CBI in an alleged Rs 280-crore cheating case after it received a complaint from the PNB on January 29.

The bank, sources said, has now found that the total “unauthorised transactions” by Modi’s firms were worth $1,771.7 million. The bank filed a second complaint with the CBI on February 13.

READ: CBI books Nirav Modi in Rs 280-crore ‘cheating’ case

Sources said the Enforcement Directorate (ED) has registered a case under the Foreign Exchange Management Act (FEMA) to probe the transactions. The agency has sought documents related to the case from the CBI. While the CBI will probe the alleged involvement of bank officials, the ED will look into violation of foreign exchange and anti-money laundering norms if any, sources said.

The Reserve Bank of India (RBI) too is looking into the alleged illegal transactions. “The RBI is investigating these transactions… how it happened and the extent of fraud,” a top banking source said.

READ | Inside the PNB fraud: What an LoU is, how case may impact the bank

It’s learnt that the alleged role of three-four Indian banks, which offered credit based on letters of undertaking (LOU) issued by PNB, will also be probed. The RBI is expected to inspect the books of PNB and other banks.

The alleged Rs 11,000 crore fraud at PNB assumes significance since the money in question is nearly one-third of its total market capitalisation of Rs 35,365 crore and 2.55 per cent of the total loan book of Rs 4.5 lakh crore as of December 2017.

The PNB said these alleged transactions are contingent in nature and the liability arising out of these on the bank will be decided based on the law and genuineness of underlying transactions.

“The matter was already referred to law enforcement agencies to examine and book the culprits as per law of the land. The bank is committed to clean and transparent banking,” PNB said.

Rajiv Kumar, Secretary, Department of Financial Services, said the case is an isolated one that dates back to 2011.

Last month, PNB received capital infusion of Rs 5,473 crore as part of a government plan to strengthen the balance sheet of ailing public sector banks. The bank reported gross non-performing assets (NPA) of Rs 57,519 crore at the end of the quarter ended December 31, up 3.4 per cent from a year ago. The bank reported a net worth of Rs 38,096.45 crore for FY 17.

On January 31, the CBI registered a FIR against Nirav Modi, his wife, brother and uncle Mehul Choksi under Indian Penal Code (IPC) sections related to criminal conspiracy, cheating and provisions of the Prevention of Corruption Act. The FIR said a few public servants “committed abuse of official position to cause pecuniary advantage to Diamonds R Us, Solar Exports, Stellar Diamonds” — all promoted by Nirav Modi.

Modi, his wife, brother and Choksi are partners in these three firms, the CBI FIR said.

According to the earlier complaint of the PNB, two of its employees “fraudulently “ issued eight LOU and “transmitted SWIFT instructions” to overseas branches of Indian banks to raise buyers’ credit for Modi’s firms without “making entries in the bank system”.

The bank, in its complaint, alleged that fraudulent issuance of LOU took place on January 16 for and on behalf of the accused firms which approached the bank and presented a set of import documents to the branch with the request to allow buyers’ credit for making payments to overseas suppliers.

The bank officials requested the firms to furnish 100 per cent cash margin for LOU for raising buyers’ credit. The firms contested this, saying they had availed this facility in the past too, the FIR alleged. However, branch records did not reveal details of any such facility granted to the firms, it said.

The bank alleged that a deputy manager, who has since retired, and another employee had fraudulently issued LOU totalling $4.42 crore, equivalent to Rs 280.70 crore, for the Hong Kong branches of two Indian banks for and on behalf of Diamonds R Us, Solar Exports, Stellar Diamonds.

Email and phone calls to PNB and Nirav Modi’s spokesperson Wednesday did not elicit any response.

On Wednesday, the shares of PNB dropped as much as 9.81 per cent to close at Rs 145.80 a piece.

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  1. B
    Balu
    Feb 17, 2018 at 3:03 pm
    shocking news !! its happening because the top Management let 'lose rope' and they themselves r most corrupted. the fugitive who fraudulently took money is in U K. Sahara's, etc. to eradicate such happenings - at the first order, if found faulty, fraud, instead of ins uting an investigation / commission, sack the Chief of the Bank immediately, impound all his/her properties freeze his/her monetary/negotiable instruments along with sacking his kith and kin whoever working/employed in any bank irrespective to Govt. or private without prejudice. Capital punishment be awarded without prejudice to such fraudulent top Management and its accomplices/associates. Cancel all their iden ies as INDIAN right from PAN/Aaadhar/Ration Card and even from the registrar of properties and impound to Court. Unless such strict and serious action is taken, these scandals shall always happen, say recur every then and now, no doubt.....
    (0)(0)
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    1. B
      Balu
      Feb 17, 2018 at 3:02 pm
      shocking news !! its happening because the top Management let 'lose rope' and they themselves r most corrupted. the fugitive who fraudulently took money is in U K. Sahara's, etc. to eradicate such happenings - at the first order, if found faulty, fraud, instead of ins uting an investigation / commission, sack the Chief of the Bank immediately, impound all his/her properties freeze his/her monetary/negotiable instruments along with sacking his kith and kin whoever working/employed in any bank irrespective to Govt. or private without prejudice. Capital punishment be awarded without prejudice to such fraudulent top Management and its accomplices/associates. Cancel all their iden ies as INDIAN right from PAN/Aaadhar/Ration Card and even from the registrar of properties and impound to Court. Unless such strict and serious action is taken, these scandals shall always happen, say recur every then and now, no doubt.....
      (0)(0)
      Reply
      1. B
        Balu
        Feb 17, 2018 at 3:00 pm
        shocking news !! its happening because the top Management let 'lose rope' and they themselves r most corrupted. the fugitive who fraudulently took money is in U K. Sahara's, etc. to eradicate such happenings - at the first order, if found faulty, fraud, instead of ins uting an investigation / commission, sack the Chief of the Bank immediately, impound all his/her properties freeze his/her monetary/negotiable instruments along with sacking his kith and kin whoever working/employed in any bank irrespective to Govt. or private without prejudice. Capital punishment be awarded without prejudice to such fraudulent top Management and its accomplices/associates. Cancel all their iden ies as INDIAN right from PAN/Aaadhar/Ration Card and even from the registrar of properties and impound to Court. Unless such strict and serious action is taken, these scandals shall always happen, say recur every then and now, no doubt.....
        (0)(0)
        Reply
        1. Suresh Shah
          Feb 15, 2018 at 12:52 pm
          rules should be amended by which banks cannot issue such LOG without auditor and lawyer approval
          (0)(0)
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          1. Suresh Shah
            Feb 15, 2018 at 12:29 pm
            NDA govt busying in linking asdhaar and asking common man to stand in line - not auditing banks for such large scams
            (3)(1)
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