Nirav Modi case: RBI calls PNB fraud ‘a case of operational risk’, vows appropriate supervisory action

The RBI also denied a report that PNB had been asked to assume all liabilities arising from the fraud. “There have been reports in the media that in the wake of fraud involving a sum of USD 1.77 billion that has surfaced in Punjab National Bank (PNB), the Reserve Bank of India (RBI) has directed PNB to meet its commitments under the Letter of Undertaking (LOU) to other banks. RBI denies having given any such instructions,” the RBI clarified.

READ | PNB fraud expands: Rs 3000 crore more from 17 banks, money laundering evidence

On Wednesday, State-owned PNB, in a regulatory filing to the Bombay Stock Exchange, said it had detected fraudulent transactions worth over Rs 11,000 crore in its mid-corporate branch in south Mumbai. Two days later, evidence emerged that as many as 17 banks lent about Rs 3,000 crore additionally to various firms of Nirav Modi, including his flagship firm Firestar International Ltd.

A total of 18 PNB employees remains suspended as of now as the internal investigation of the bank is currently underway.

ALSO READ | PNB fraud: In December, Nirav Modi’s firm Firestar International was moving to go public, raise funds

Earlier in the day, the external affairs ministry suspended with immediate effect the passports of diamantaire Nirav Modi and his business partner Mehul Choksi, two of the prime accused, for four weeks. The ministry, which said it did not know where Nirav Modi was, gave them one week to respond why their passports should not be revoked.

“If they fail to respond within the stipulated time it will be assumed that they have no response to offer and the MEA will go ahead with the revocation,” the Ministry of External Affairs (MEA) said in a statement.

Modi and Choksi, who are believed to have fled the country, were also summoned by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA) and asked to appear before the agency within a week’s time, according to officials.

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.

With PTI inputs

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