While the Banking sector is busy counting its losses in one of the most infamous banking frauds, law enforcement agencies like CBI and ED had raided properties and stores connected to businessman Nirav Modi and Mehul Choksie-led Gitanjali Jewels.
So far CBI has arrested three persons, including the 2 PNB staffers who are in judicial custody till March 3. However, the ED had raided several of Nirav Modi’s premises and seized diamonds, gold and jewellery worth Rs. 5, 670 crores. The banks that are possibly be affected include UCO Bank and State Bank of India (SBI), while Axis Bank claims that it has already sold its exposure to Nirav Modi and his firms.
Here are the 10 developments in the Nirav Modi-PNB scam:
What is PNB Fraud: A PNB official from Mumbai filed a criminal complaint with Central Bureau of Investigation (CBI) on January 29 against three companies such as Solar Exports, Stellar Diamonds and Diamond R US. The complaint also includes billionaire jeweller Nirav Modi and Mehul Choksi, the managing director of Gitanjali Gems. As per the complaint, both Modi and Choksi had defrauded the bank and caused a loss of Rs. 280 crore ($43.8 million). The bank alleges that the two employees at the Mumbai branch had helped the companies and people managing them get “letters of undertaking” (LoUs) from it without having a sanctioned credit limit or maintaining funds “on margin”. PNB said that the LoUs were used to obtain short-term credit from overseas branches of other Indian banks. CBI has registered a preliminary case against the companies and the people accused on January 31. PNB also said that a detailed probe is underway. On February 14, PNB divulged that it had found fraudulent and unauthorised transactions totalling Rs. 11,300 crores at the Mumbai branch. Investigators have said the latest disclosure was related to the earlier case filed.
Enforcement Directorate Raids: The country’s financial crime agency, the ED had said that it had examined several locations connected to Nirav Modi, for the last 48 hours, seizing diamonds, gold and jewellery. Meanwhile, the Enforcement Directorate revealed on Saturday that it carried out additional searches at 21 locations of companies related to Modi, confiscating Rs. 25 crores ($3.89 million) in precious stones, metals and jewellery. Both authorities (CBI and ED) have carried out multiple raids since PNB disclosed the fraud, targeting PNB, Modi and Choksi, with the Enforcement Directorate now having seized diamonds, gold and jewellery worth Rs. 5,670 crore.
CBI Arrests Three Persons: The federal agency detained two employees of Punjab National Bank, as the state-run lender claims to be the victim of a $1.77 billion fraud, in the first arrests in a fast-widening investigation in the country’s biggest-ever bank scam. The suspected fraudulent such as Gokulnath Shetty and Manoj Kharat have steered loans to companies connected to billionaire jeweller Nirav Modi and entities related to jewellery retailer Gitanjali, which is led by Modi’s uncle, Mehul Choksi. The third person, Hemant Bhat, has also been arrested by CBI. As per a report, he is described as the “authorised signatory” of the companies tied to Nirav Modi.
Court Gives Custody: On Saturday, a court issued an order for the three suspect (arrested by the federal police on suspicion of involvement in a $1.77 billion fraud at state-run Punjab National Bank) to stay under judicial custody until March 3.
CBI Raids on Gitanjali: The investigative agency also carried out raids on Friday on the offices of jewellery retailer Gitanjali, whose chief executive has been involved along with Modi of conspiring with PNB employees to fraudulently get advances for payments to overseas suppliers.
What PNB Says: After the outbreak of the scam, Punjab National Bank shares have fallen dramatically. PNB officials had met representatives of Nirav Modi and Gitanjali Group to demand payment of the outstanding amounts, the bank said in a clarification to the stock exchanges. “A series of meetings were held with representatives of Nirav Modi group and Gitanjali Group at Delhi & Mumbai to impress upon them to pay the amount. They were also directed to provide all necessary documents as per law to ensure that the imports are bonafide trade transactions,” the PNB statement said in the clarification dated February 15 to the exchanges accessed on Saturday. “The amount is big. But we will have the capacities to bring it back to normalcy, maybe within six months,” PNB CEO Sunil Mehta said.
What SBI Says: The SBI though doesn’t have the firsthand exposure to high profile fraud-accused jeweller Nirav Modi, however, the public sector bank does have an “exposure” to the whopping amount of $212 million by way of a LoU issued by PNB, said SBI chairman Rajnish Kumar on Friday.
What UCO Bank Says: On Saturday, State-run UCO Bank said it has an outstanding exposure of about $411.82 million in the $1.8 billion fraud detected in public sector PNB and that it was confident of receiving the payment.
What Axis Bank Says: Bank said on Thursday that it had dealt in transactions that had been guaranteed with letters of undertaking from Punjab National Bank, but it had since sold those transactions.
Income Tax Seizes Assets: The IT department had issued a warning through an internal note that domestic banks could take a hit of more than $3 billion from loans and corporate guarantees provided to Modi and Choksi. A tax department spokeswoman revealed to Reuters officials had seized 29 properties and 105 bank accounts connected to Modi.