Billionaire jeweller Nirav Modi seen behind fraud; CBI, ED probing case.
New Delhi: Punjab National Bank (PNB), India’s second-largest state-owned bank, said on Wednesday that it has detected a Rs 11,346 crore ($1.8 billion) fraud at a Mumbai branch, the impact of which could extend to other lenders as well.
Billionaire diamantaire Nirav Modi, 47, and his associates have been accused of involment in the fraud, along with some senior PNB officials, and the matter has been referred to law enforcement agencies for probe and recovery.
The Central Burau of Investigation (CBI) officials were quoted in agency reports as saying that they had received two complaints from PNB against Mr Modi and a jewellery company alleging fraudulent transactions worth about Rs 11,346 crore and are probing the matter. PNB has also involved the Enforcement Directorate to track the money trail. In an exchange filing on Wednesday, PNB said it has detected some fraudulent and unauthorised transactions in one of its branches 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.” “Four big jewellers — Gitanjali, Ginni, Nakshatra and Nirav Modi — are under scanner. The CBI and Enforcement Directorate is looking at their arrangements with various banks and end use of money,” a senior official of a public sector bank told PTI. Finance ministry has asked all banks to send reports linked to this case or other such incidents by the end of this week. However, it sought to allay worries over the fraud case at PNB saying it was not “out-of-control” and action is being taken.
PNB’s shares plunged by 10 per cent on Wednesday.
The fraudulent transactions are eight times the bank’s 2017 net income, exchange filings show. Jaikishan J. Parm-ar, research analyst, Angel Broking, said news of this fraud dampens sentiments around PNB, which had seen a marginal improvement in its asset quality in this quarter.
Mr Modi, whose jewellery creations are popular among celebrities globally, including Kate Winslet and Priyanka Chopra, may face a fresh CBI probe as the agency is looking at suitable legal action, said news agency reports. He is already being investigated by the CBI for alleged cheating and fraud involving Rs 280.70 crore at another PNB branch, said reports.
According to sources, Letter of Undertaking was issued fraudulently by PNB to Mr Modi and his associates and it was encashed overseas by them from different banks, both private and public sector. Sources said that all this was being done with the connivance of officials as high as deputy general manager since 2011. PNB is said to have suspended 10 employees in connection with the fraud.
Based on these transactions, done by his brother Nishal, wife Ami and business partner Mehul Chinubhai Choksi, other banks appear to have advanced money to these customers abroad.
Talking about banks which advanced money to these customers abroad, PNB said, “In the bank these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions.”
This is the second case in less than 10 days against the diamond merchant. On February 5, the CBI booked Mr Modi, his wife, brother and a business partner for allegedly cheating PNB of over Rs 280.70 crore in 2017. And on Wednesday, the ED also registered a money laundering case in 2017 cheating case.
On January 31, Mr Modi’s offices in Delhi, Surat and Jaipur were raided by income tax officials. Nirav Modi is the founder of $2.3 billion Firestar Diamond and has boutiques across three continents — in London, New York, Las Vegas, Hawai, Singapore, Beijing and Macau. In India, Mr Modi has stores in Mumbai and Delhi.
He grew up in Belgium, dropped out of Wharton and moved to India where he got trained in the diamond trade under his uncle.