Punjab National Bank Says $1.8 Billion Fraud, A Nirav Modi Link: 10 Facts

Punjab National bank said $1.8 billion or over Rs 11,000 crore had been illegally transferred

Mumbai: Punjab National bank, India's second-largest government bank, reported on Wednesday that $1.8 billion or over Rs 11,000 crore of taxpayers' money had been illegally transferred abroad to select customers from a single branch in Mumbai. The revelation will affect the banking industry with the Finance Ministry asking all banks to investigate their books for similar cases and report to it by the end of the week. Not long after the news surfaced this morning, sources in the CBI were quoted by the Press Trust of India as saying that the agency had received two complaints against celebrity jeweller Nirav Modi, alleging fraud worth Rs 10,000 crore.

Here is a 10-point guide to the massive story:

Punjab National Bank said in a regulatory filing to the stock exchange that it had detected "fraudulent and unauthorised" transactions amounting to around Rs 11,360 crore at a branch in Mumbai. The illegal transactions benefited "a few select account holders with their apparent connivance" and based on these, "other banks appear to have advanced money to these customers abroad".
The CBI received the bank's complaints against Nirav Modi late last night, sources told the Press Trust of India.
Major jewellers Gitanjali, Ginni, and Nakshatra have also come under the scanner of various investigating agencies, said PTI, quoting an unnamed bank official.
Nirav Modi, 48, is already being investigated by the CBI in connection with fraud worth Rs 280 crore. The diamond merchant was raided by income tax officials on January 31; his offices in Delhi, Surat and Jaipur were searched.
CBI sources say Nirav Modi, his wife, brother and others worked with bank officials to illegally obtain Letters of Undertaking, which were cashed overseas from different banks, both private and public sector.
The CBI was told that eight Letters of Understanding were issued to the billionaire jeweller, without being entered in the books, directly for Hong Kong-based banks.
The alleged fraud was facilitated by senior bank officials since 2011, CBI sources said. The bank has suspended 10 employees but has not revealed names.
The alleged swindle was revealed when Nirav Modi's companies sought a fresh loan last month, the bank said. The officials who had helped them earlier had retired. When the bank insisted on guarantees to issue Letters of Understanding, the Modi companies allegedly said they had used the facility before. That's when the bank started investigating.
Nirav Modi is the founder of $2.3 billion Firestar Diamond and counts among his clients and brand ambassadors several world renowned celebrities. He has boutiques across three continents - in London, New York, Las Vegas, Hawai, Singapore, Beijing and Macau. In India, Mr Modi has his stores in Mumbai and Delhi.
Last year, the state-owned Bank of Baroda was cheated of Rs 6,000 crore, or almost a billion dollars, by two businessmen.