Celeb jeweller Nirav Modi named in PNB’s $1.77-b fraud

Our Bureau | | Updated on: Dec 06, 2021

Bank suspends 10 officers, lodges complaint with CBI; more banks may be hit

A fraudulent transaction at a Mumbai branch has punched a possible $1.77-billion hole in Punjab National Bank’s coffers, the State-run bank told stock exchanges in a filing.

Multiple fraudulent “letters of undertaking” and “unauthorised messages” were issued from PNB’s Brady House branch for the “benefit of a few select account holders with their apparent connivance”, the filing said.

While the bank refused to name the beneficiaries, the CBI on Wednesday said it had received two complaints from PNB against billionaire diamantaire Nirav Modi and a jewellery company. The complaints pertained to alleged fraudulent transactions worth about ₹11,400 crore, officials said.

Modi is already being investigated by the CBI for alleged cheating and fraud involving ₹280 crore at a PNB branch, the officials added.

“Based on these transactions other banks appear to have advanced money to these customers abroad,” said the PNB filing, which added that the matter had already been referred to law enforcement agencies.

Banking industry experts says that although PNB sees these fraudulent transactions only as a contingent liability, RBI norms require banks to provide 100 per cent of the sum the day a fraud is detected and reported to law enforcement agencies. So the bank would need to provide for the entire amount of fraud when the books for the current quarter are updated, they said.

The Finance Ministry sought to downplay the issue. “I don’t think this is out of control or too big a worry at this point. That is my broad sense,” said Lok Ranjan, Joint Secretary in the Department of Financial Services, on the sidelines of an event here.

PNB officials and Nirav Modi were not available for comments.

The transactions involved dates back to the year 2012-13, when fraudulent “letters of undertaking” (letter of comfort/guarantee) were given to foreign lenders in favour of firms belonging to Nirav Modi, his wife Ami Nirav Modi, Nishal Modi and Mehul Choksi (Nirav’s uncle) partners of Diamond R US, Solar Exports and Stellar Diamond, sources said.

It may be recalled that some of the Choksi-led firms have been facing financial difficulties in recent years and underwent corporate debt restructuring. However, there was never a situation of default, sources in the banking industry said.

The situation that PNB faces could still be salvaged if the money is paid back by the Nirav Modi-led firms to the foreign lenders, and the final claim on PNB gets reduced in the coming days, they said.

Interestingly, on February 5, PNB had estimated the exposure at ₹280.70 crore, a figure that has now ballooned to $1.77 billion (₹11,334 crore).

Published on February 14, 2018
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