Even as we have been wondering a way to record our profits tax returns and deposit the premiums of our insurance policies, a jeweller named Nirav Modi had finished fraudulent transactions worth Rs 11,300 crores from the Mumbai branches of Punjab National bank (PNB) 2nd-largest cash lender in India.
It is not just PNB that has been laid low with the fraud, six different creditors inclusive of Allahabad Bank, Axis Bank and Union Bank which lent money based on PNB’s letters of undertaking have also been hit.
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Despite the fact that PNB in its letter didn’t reveal the names of people concerned in the fraud, the Central Bureau of Investigation (CBI) received two lawsuits from PNB against billionaire diamantaire Nirav Modi and a jewelry organization alleging fraudulent transactions really worth approximately Rs Rs 11,300 crores. this is further to the Rs 280 crore fraud case that he’s already under investigation for.
Who’s Nirav Modi?
Nirav Modi is a diamond jewelry designer, who has his own worldwide jewelry house. He comes from a family of diamond traders and established his very own brand after his name in 2010. The 46 years is also the Chairman of Firestar International.
In 2017 he was ranked the 57th richest man in India through Forbes. Modi is the nephew of Gitanjali gemstones owner Mehul Choksi, who was booked together with him in the first PNB fraud case. After the PNB FIR, he’s said to have fled India.
When and how did the fraud happen?
In step with PNB, Modi approached the financial institution which issued a letter of the project (Lou), that is a financial institution guarantee for a client, agreeing to unconditionally pay off the principal and interest on client’s loan. The client could be an importer who uses funds or credit limit with an Indian bank to get cheaper foreign currency loans.
In line with the CBI, two PNB officers, deputy manager, Gokulnath Shetty and SWO Manoj Hanumant Kharat were the two financial institution officers at the back of the fraud.Shetty used his access to the SWIFT messaging system used by banks for overseas transactions to authenticate guarantees given on LoUs without any sanctions, thus the transactions remained unnoticed so far.
It came to light only after other lenders approached PNB after the LoUs matured seeking repayment, only to find out that it was fraudulent.
How huge is it?
In easy phrases, it is huge. Rs 11,000 crore is nearly one-third of its total market capitalization of Rs 35,365 crore and 2.55 percent of the total loan book of Rs 4.5 lakh crore as of December 2017.