In response to diamond merchant Nirav Modi’s letter saying that Punjab National Bank closed all option to recover their dues by going public with the matter, PNB said in a clarification to stock exchanges on Thursday that the bank pursued all legal avenues to recover its dues. “We have followed lawful avenues available to us as per law of land to recover our dues,” PNB said in a clarification to exchanges.
Meanwhile, in a separate letter to Modi, PNB’s General Manager, International Banking Division, Ashwini Vats, said Modi’s companies were getting the Letter of Undertakings issued illegally and in apparent violations of the Foreign Exchange Management Act (FEMA), sources said.
“You were getting LoUs issued illegally and in an unauthorised way through few bank officials. At no stage such facilities were extended by our bank to the 3 partner firms. When these illegal activities surfaced, they pointed out towards apparent violation of FEMA and money laundering aspect. As required by law, the bank was compelled to bring their activities to the notice of Law and Enforcement agencies which the bank did,” PNB’s Vats wrote in his letter, according to sources.
The state-owned lender said the Modi’s offers for loan settlement were not backed by an upfront amounts and timelines. “Your commitment and undertaking for sparing of the total liability was not backed by providing upfront amounts and timelines. However, should you have any concrete and implementable plan, do revert back,” PNB said in its letter. Shares of the PNB closed down 2.77 per cent at Rs 114.05 at the National Stock Exchange on Thursday.
Last Thursday, PNB top management said it will pursue recovery and has received some “vague offers” for repayment of money from Modi, whose companies are embroiled in fraudulent transactions worth $1,771.7 million.
PNB MD and CEO Sunil Mehta said last Thursday: “Nirav Modi has not come out with any concrete plan to repay so far. But they’re coming out with some vague offers which are under examination … He has not come to us personally. We have requested him to come and give us a plan. And give us a written plan for the repayment”.
Modi had said in his letter to PNB that the lender’s “anxiety to recover dues immediately” , despite repayment offer, has destroyed his business and restricted the bank’s ability to recover all the dues leaving a trail of unpaid debts.
PNB said in its letter that the issuance of LoUs in connivance with its bank officials was in violation of FEMA norms. Gitanjali Gems Ltd, the company at the centre of an alleged loan fraud executed in collusion with staffers of Punjab National Bank, did not adhere to rules pertaining to FEMA and also defaulted on timely repayments of loans taken from Life Insurance Corporation of India, ICICI Bank and IDBI Bank, according to the Secretarial Audit Report and Independent Audit Report conducted on the company’s accounts for 2016-17.
About the impact of the scam on the financials and operations of the bank, the bank told the stock exchanges: “We have enough assets/ capital to meet any liability which is decided as per law.”