₹11.4Kcr fraud hits PNB amid Ni­rav Modi probe

Hindustan Times (Delhi) - - FRONT PAGE - Re­mya Nair, Gopika Gopaku­mar, and Shaswati Das let­ters@hin­dus­tan­times.com CON­TIN­UED ON P 6

NEW DELHI/MUM­BAI: State-run Pun­jab Na­tional Bank (PNB) said it has un­earthed fraud­u­lent trans­ac­tions of around ₹11,400 crore in one of its branches in Mum­bai and filed a com­plaint with the Cen­tral Bu­reau of In­ves­ti­ga­tion (CBI) on the fraud amid con­cern that the con­ta­gion could spread to other banks.

Ac­cord­ing to two peo­ple fa­mil­iar with the mat­ter, who asked not to be iden­ti­fied, the case per­tains to jew­eller Ni­rav Modi, who is al­ready be­ing in­ves­ti­gated by the fed­eral in­ves­ti­ga­tion agency in con­nec­tion with an ear­lier com­plaint by the same bank. The com­plaint was about fraud­u­lent trans­ac­tions of ₹280 crore, although the bank said at the time that it was check­ing if the mag­ni­tude of the swin­dle was more.

Modi did not re­spond to an email seek­ing com­ment.

PNB man­ag­ing di­rec­tor and CEO Su­nil Me­hta didn’t re­spond to an email seek­ing com­ment.

The chief ex­ec­u­tive of a sta­te­owned bank said on con­di­tion of anonymity that Modi had writ­ten to bankers of­fer­ing to re­pay all his dues to them by sell­ing his flag­ship com­pany Firestar Di­a­mond, which is val­ued at ₹6,435 crore, in the next three to six months. PNB’S shares fell 10% on Wed­nes­day. The fi­nance min­istry moved swiftly to con­tain the cri­sis, and is­sued an ad­vi­sory late on Tues­day ask­ing all banks to re­view all their large ex­po­sures (or to­tal loans to one cus­tomer). The min­istry has also asked the ED, which in­ves­ti­gates frauds in­volv­ing for­eign cur­rency and trans­ac­tions, to in­ves­ti­gate the mat­ter.

The fraud was per­pe­trated by em­ploy­ees of PNB who al­legedly is­sued au­tho­rised so-called let­ters of un­der­stand­ing (ba­si­cally, guar­an­tees) that helped Modi’s com­pa­nies raise credit.

It is be­lieved that they did so with­out mak­ing any en­tries in the bank’s books or record­ing them in the core bank­ing sys­tem.

The in­ter­na­tional branches of many other In­dian banks — it is be­lieved as many as 30—in­clud­ing Al­la­habad Bank, Axis Bank Ltd, State Bank of In­dia (SBI), Union Bank of In­dia and some for­eign banks loaned money to Modi’s com­pa­nies based on th­ese fraud­u­lent guar­an­tees.


A Pun­jab Na­tional Bank branch in Mum­bai.

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