The PNB scam relates to fraudulent Letters of Undertaking (LOUs) worth over Rs 11,000 crore issued by Punjab National Bank's Brady House branch in Mumbai and this biggest scam was cleverly designed and executed by Mehul Choksi and his nephew Neerav Modi in connivance with corrupt banking officials. The PNB scam relates to fraudulent letter of undertaking worth Rs 11,000 crore issued by the bank. As on 18 May 2018, the scam ballooned Rs.14,356.84 crore (US $2.1 billion).
The key accused in the case were jeweller and designer Nirav Modi, his maternal uncle Mehul Choksi, and other relatives and some PNB employees. Nirav Modi and his relatives escaped India in early 2018, days before the news of the scam became public. Nirav Modi is hiding in London, He allegedly travelled to London on a fake passport.
In January , 2018, India's second-biggest state-controlled lender, PNB found to its surprise that to help two jewellery groups owned by Indian diamond magnate Nirav Modi and his uncle Mehul Choksi, PNB bank staff at a single Mumbai branch issued fake bank guarantees in over several years to raise billions of dollars in foreign credir.. The biggest element of surprise was how the scam went unnoticed from the strict surveillance of PNB higher authorities and RBI for years despite strict scrutiny.
Some corrupt bank employees bypassed PNB's core system to issue the LOUs (Letters of Undertakings) to overseas branches of other Indian banks through Swift- International Financial Communication System. Bank officials used fake LoUs at PNB's Brady House branch in Fort, Mumbai. The LoUs were opened in favour of branches of Indian banks for import of pearls for a period of one year, despite RBI guidelines laying out a total time period of 90 days from the date of shipment.
This guideline was ignored by overseas branches of Indian banks. They failed to share any document/information with PNB, which were made available to them by the firms at the time of availing credit from them. Nirav Modi got his first fraudulent guarantee from PNB on March 10, 2011 and managed to get 1,212 more such guarantees over the next 74 months.
After the scam was exposed, the Enforcement Directorate (ED) recovered bank token devices of the foreign dummy companies used by the fugitive diamond trader to transfer the fraudulent funds. The probe agency found that Nehal Modi, brother of Nirav Modi had destroyed the devices and had even secured a server located at United Arab Emirates (UAE) soon after the scam broke out. These dummy firms had been receiving the fraudulent PNB LoUs and were based out in British Virgin Island and other tax havens.
PNB employees even misused the SWIFT network to transmit messages to Allahabad Bank and Axis Bank on fund requirement. While all this was done using SWIFT passwords, the transactions were never recorded in the bank’s core system -thereby keeping the PNB management in the dark. . It went unnoticed for many years. it just explains how faulty is Indian Banking system ?
A 162-page internal report, produced by PNB officials found that bare lapses went far beyond a few branch officers. The report said how failings by 54 PNB officials - ranging from clerks to foreign exchange managers, and auditors to heads of regional offices, allowed the fraud to be perpetrated. Eight of the 54 are among those who have been charged by the police for their roles in the scandal.
Even financial experts feel that action should have been taken against those who scrutinised the Nirav Modi loan case, and against other top officials to whom internal audit reports of the bank were handed over year after year since 2011.
As per procedures, complaints of alleged irregularities and rip-offs are received every day in the finance ministry. The ministry forwards them for further action to the concerned authorities. But it is intriguing that no complaint was received against PNB scam.
By sacking a few lower-rung employees (18), PNB has just distracted the main issue. The malaise runs deep in the banking system. The government hasn't been proactive in directing the Reserve Bank of India (RBI) and the banks to take strict action against all those involved in this daylight robbery. It is due to these reasons that bank fraud after fraud is committed in India with impunity.
Earlier, liquor baron Vijay Mallya laundered over Rs 1,300 crore through 13 shell companies in US, Ireland, Mauritius and France. It included a loan of about Rs 900 crore from IDBI-KFA bank. Out of this Rs 423 crore was remitted out of Indi
Nirav Modi, Vijay Mallya, and 29 other Indian fugitives owe more than Rs40,000 crore to Indian banks. Among the prominent names are Vijay Mallya, who owes Rs9,000 crore to a group of banks; Nirav Modi, his wife Ami Modi, brother Neeshal Modi and uncle Mehul Choksi, named in the Rs12,636 crore fraud at Punjab National Bank; Jatin Mehta of Winsome Diamonds, who owes Rs7,000 crore; former Indian Premier League chief Lalit Modi, accused of siphoning off Rs125 crore from the country’s cricket board; and Sterling Biotech Ltd directors Chetan Jayantilal Sandesara and Nitin Jayantilal Sandesara for alleged bank fraud of Rs5,000 crore.
Now India has to spend huge public money to bring back these fugitives hiding in foreign countries back home. It's a travesty of the justice.
Experts feel legislation to target fugitive economic offenders will act as a deterrent and could also be used retrospectively in some cases.
Over to Modi Govt. Jai Shri Ram
(Chander Sharma)
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