Nirav Modi procured fraudulent letters of undertaking from a PNB branch in Mumbai, based on which he allegedly secured credit from the foreign arms of several other Indian lenders
Jeweller Nirav Modi
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The country's banking sector was hit by yet another scam as state-owned Punjab National Bank detected a USD 1.77 billion (about Rs 11,400 crore) fraud involving billionaire jeweller Nirav Modi. Modi allegedly acquired fraudulent letters of undertaking from a branch in Mumbai to secure overseas credit from other Indian lenders. The matter is currently being investigated by the Central bureau of Intelligence.
In its regulatory filing, PNB noted, "The Bank has detected some fraudulent and unauthorised transactions in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions other banks appear to have advanced money to these customers abroad."
Apart from the Rs 11,400 crore, Nirav Modi is already being investigated by the CBI based on an earlier complaint filed by the Punjab National Bank
What is the Scam about?
1. Based on the fraudulent letters of undertaking from a PNB branch in Mumbai, Nirav Modi secured credit from the foreign arms of several other Indian lenders which reportedly include the Union Bank of India, the Allahabad Bank and the Axis Bank.
2. These banks are said to have offered credit based on letters of undertaking (LoUs) issued by PNB. An LOU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. Foreign bank branches too are under investigation.
3. Three other jewellers, Gitanjali, Ginni and Nakshatra are also under the scanner with CBI and ED looking at their arrangements with various banks and end use of money, said a senior official of a public sector bank.
4. PNB has suspended 10 officers over the scam and referred the matter to the CBI for investigations. Meanwhile the Enforcement Directorate is continuing raids at various places associated with the well-known jewellery designer.
5. The Enforcement Directorate issued summons for appearance to Nirav Modi and his business partner Mehul Choksi in connection with its money laundering probe.
6. According to the sources, Modi and his associates fled the country before the CBI could issue look-out notices. However, the CBI approached the Interpol to locate billionaire jewellery designer Nirav Modi and his family
7. Suspicions have also been raised against senior officers at the Punjab National Band. A deputy manager and a clerk from the PNB bank were also booked.
8. Meanwhile, Nirav Modi was reportedly traced to his apartment at JW Marriott's Essex House in New York's Manhattan. The Ministry of External Affairs revoked the billionaire and his business partner his business partner Mehul Choksi's passports. While the Ministry claimed to be unaware of the businessman's whereabouts, it has given him one week to respond to why the passports should not be revoked
Who is Nirav Modi?
Nirav Modi is a billionaire diamond designer, who is the founder and director of his own luxury jewellery chain. Modi has often been spotted among the who's who of showbiz. It has also been alleged that Nirav Modi had direct access to Prime Minister Narendra Modi's office.
Nirav Modi is a Wharton School dropout. His demure presence at social events hardly hid his immense influence. Modi's designs have even been spotted at the Oscars.
The government's reaction
The NDA government on Thursday sought to distance itself from the financial fraud done by jeweller Nirav Modi, blaming the previous Congress-led UPA regime for influencing loans that became non-performing assets (NPAs) while asserting that the guilty will not be spared.
Addressing a press conference, Law and Justice Minister Ravi Shankar Prasad said no loans have been given in the Narendra Modi government's tenure which can become NPAs and the loan to Nirav Modi was given during the tenure of the United Progressive Alliance (UPA).
The Opposition's reaction
The Congress targeted the government over the scam and accused it of doing nothing to stop "independent India's biggest bank fraud" despite being informed of it. "Loot and escape" had become the hallmark of the government, Congress leaders said, equating the celebrity designer with liquor baron Vijay Mallya, former IPL chief Lalit Modi and other businessmen who had left the country after allegedly committing frauds worth crores.
Party president Rahul Gandhi led the charge and said the NDA government looked the other way when Nirav Modi used his clout with the prime minister to slip out of the country and steal Rs 12,000 crore.The Aam Aadmi Party also made similar accusations.
Other Scams
Major scams and the amount involved in crores
In the past several scams have shaken India. While the 2G scam involved 176,000 crores and involved several high profile people such as Nira Radia, A. Raja, M. K. Kanimozhi, The stamp paper scam headed by Abdul Karim Telgi involved a massive Rs 200 billion. During his hay days Telgi appointed 350 people as agents who sold fakes to bulk purchasers, including banks, insurance companies, and stock brokerage firms. An aspect of the scam that grabbed headlines was that it required the involvement of a number of police officers and government officials.
Similarly the Saradha Group financial scandal, which was unearthed in 2013, involved the massive fraud of . The total amount involved the massive fraud of Rs 40,000 crores. Several other high profile scams include the Coal Allocation Scam, the Satyam Scam, the fodder scam, the 1992 Harshad Mehta scam among others.
With Inputs From Agencies
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