PNB cautioned other banks about modus operandi of fraud in a letter that Business Standard has access to
Punjab National Bank (PNB) on Wednesday made a startling revelation that it has detected a colossal fraud worth Rs 114 billion (Rs 11,400 crore) in one of its Mumbai branches.
PNB said that it had been defrauded of about Rs 114 billion by jeweller Nirav Modi, his maternal uncle Mehul Chinubhai Choksi, and other relatives through some firms they own with the help of the bank employees. According to TV reports, Nirav Modi said he willing to pay back Rs 50 billion (Rs 5,000 crore).
So what really happened?
How the PNB scam unfolded
Last week, PNB had lodged an FIR with CBI stating that fraudulent LoUs worth Rs 2.8 billion (Rs 280.7 crore) were first issued on 16 January. At the time, PNB had said it was digging into records to examine the magnitude of the fraud, a PTI report said. In the complaint, PNB had named three diamond firms, Diamonds R Us, Solar Exports and Stellar Diamonds.
In a letter to 30 banks (dated – February 12, 2018) (Business Standard has access to the letter) Punjab National Bank said:
An excerpt of the letter
Modus operandi adopted was as under:
It was found through SWIFT trail that one junior level branch official unauthorisedly and fraudulently issued LoUs on behalf of some companies belonging to Nirav Modi Group viz. Solar Exports, Stellar Diamonds and Diamonds R Us for availing buyers’ credit from overseas branches of Indian Banks.
Who carried out the fraud?
A. Two bankers
Two PNB bankers managed to bypass PNB’s core banking system to raise payment notes to overseas branches of other Indian banks, including Allahabad Bank, Axis Bank, and Union Bank of India. The employees used international financial communication system — SWIFT to raise payment notes to bank branches.
B.Corporates – Diamond, gems dealers
Initially, PNB did not reveal names of those involved in the scam. However, in a BSE filing, the bank has said the transactions were “for the benefit of a few select account holders with their apparent connivance” and that “based on these transactions other banks appear to have advanced money to these customers abroad.”
Now, PNB has revealed that it was defrauded of about Rs 114 billion by jeweller Nirav Modi, his maternal uncle Mehul Chinubhai Choksi, and other relatives through some firms they own.
Three jewellers Gitanjali Gems and its subsidiaries Gili and Nakshatra are under the scanner of investigation agencies.