Another PNB complaint, another CBI case against Gitanjali group

Jon Howard
February 17, 2018

In what could be the biggest banking fraud in India, state-owned PNB had on Wednesday said it detected a Dollars 1.77 billion (about Rs 11,400 crore) scam in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders. Assets worth Rs 1,300 crore have been seized.

"Upon confirming the first maturity of LOUs liabilities on 25.01.2018 as fraudulently credit against the bank, an FMR-1 (fraud report format of RBI) was submitted to RBI on 29.01.2018 amounting to Dollars 44.22 mio equivalent to Rs.280.70 crore (related to 3 group firms of Nirav Modi)". Based on these transactions, done by his brother Nishal, wife Ami and Mehul Chinubhai Choksi, other banks appear to have advanced money to these customers overseas.

The Finance Ministry has asked all banks to present a status report as soon as possible following reports of state-owned Punjab National Bank detecting a Dollars 1.77 billion scam.

Interpol, world's largest police organisation, has issued a diffusion notice against Nirav Modi and the four other accused in connection with the PNB fraud case after all of them vanished from the country.

PNB has now filed a complaint with the CBI alleging that Modi and companies linked to him fraudulently acquired PNB guarantees worth Rs10,000 crore ($1.6 billion) that they later used to obtain loans from overseas. While PNB has said it will honour its commitments, it did not clarify whether it will bear the entire liability, pointing out that the matter is under investigation.

Replying to a query on what took the bank so long to find out about the fraud, Mehta said that the fraud was internally detected when a customer came for renewal on January 25.

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The agency immediately swung into action registering an FIR on January 31 followed by searches at 20 locations in Mumbai and Surat and issued a look out circular on February 4 against Nirav Modi and three absconding accused, they said. "We want to convey to all our stakeholders that PNB is pursuing clean banking agenda as a responsible bank".

"I wish to make it very clear and this I can also convey on the behalf of the govt that no shall be spared in the banking system who has sought to derail ordinary banking system to help Nirav Modi", Prasad told media.

Addressing a press conference, on Thursday, Feb 15, Congress spokesperson Randeep Surjewala wondered if Nirav Modi, whom he referred to as "Chhota Modi", was tipped off by someone within the government about the PNB complaint like former IPL czar Lalit Modi and business tycoon Vijay Mallya.

The billionaire jeweller left India on January 1, before a police case was registered against him later that month, a federal police source told Reuters. It made fresh allegations against Modi to the CBI, according to PTI.

PNB share prices plummeted on Thursday. At the time, PNB had said it was digging into records to examine the magnitude of the fraud. He also said Nirav did not meet the PM at Davos but arrived on his own for CII group photo event.

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