1) 11400 Crores Fraud
2) Nirav Modi, the billionaire jeweler who along with others scammed Punjab National Bank (PNB) of over 11400 crore’s has fled the country.
3) Apparently Nirav modi spotted in which place WE DON’T KNOW But What exactly is this scam?
4) The CBI has registered a case against Nirav Modi on January 29. Punjab National Bank registered a case against Nirav Modi, His Brother Neeshal & His Uncle Mehul Choksi on February 13.
5) The Bank initially reported a scam of rupees 280 crores. But it was later realized to be rupees 11400 crores. This is a lot of money. So how does one get away with a scam of such magnitude? Possibly it is one of the biggest in Indias’s banking history.
6) Nirav Modi is an importer of diamonds. Basically importers prefer to take loans in foreign currencies as interest rates on that are lower. In this case a loan that is taken from any overseas bank guaranteed by PNB. Then what Modi had to do was approach PNB & ask for buyers credit? In order to do this PNB had to issue a “letter Of Undertaking” to an overseas bank. Basically LoU guarantees an overseas bank that if it gives money for a specified period to identified by the home bank (in this case PNB) then the home bank will assure that the money will be returned to the overseas bank.
7) Most of these overseas banks are Indian Banks with foreign branches. So the overseas bank directly give to loan PNB not Nirav Modi. An account has to create by PNB called a NOSTRO account where the overseas bank gives the loan.
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4. Punjab National Bank registered a case against
Nirav Modi, His Brother Neeshal & His Uncle
Mehul Choksi on February 13.
The CBI has registered a case against Nirav
Modi on January 29.
5. The Bank initially reported a
scam of rupees 280 crores.
But it was later realized to
be rupees 11400 crores.
This is a lot of money. So how does one get away
with a scam of such magnitude
Possibly it is one of the biggest in Indias’s
banking history.
6. Nirav Modi is an importer of diamonds. Basically importers
prefer to take loans in foreign currencies as interest rates on
that are lower. In this case a loan that is taken from any
overseas bank guaranteed by PNB.
Then what Modi had to do was approach PNB & ask for buyers
credit?
In order to do this PNB had to issue a “letter Of Undertaking”
to an overseas bank.
Basically LoU guarantees an overseas bank that if it gives
money for a specified period to identified by the home bank
(in this case PNB) then the home bank will assure that the
money will be returned to the overseas bank.
7.
8. There are many theories on how the LoUs could have
been misused in this case.
A new LoUs could have been
issued each year since 2012 to
cover the old ones.
That the existing LoUs
continuously extended
So question arise, how did PNB issue so many LoUs?
9. LoUs are generally given when the home bank has an
approved line of credit for the client .
PNB should have verified Nirav Modi’s Credit worthiness
The LoUs are delivered to SWIFT which is coded
massages that are used in international banking.
In India, all the banking records are saved on the Core
Banking System (CBS).
But surprisingly PNB didn’t use these
mechanisms.
10. It is hard to believe that the top management at
PNB would not be aware of huge loans being
guaranteed in the name of the bank without any
collateral or backing.
So PNB is not exactly the victim
of fraud as it claims to be . Even
some bank officials clearly
encourage it.
11. Who else responsible for this Scam?
• PNB’s auditors for negligence,
• Overseas banks such as Allahabad bank, Union Bank
of India & Axis Bank for overlooking NOSTRO
accounts,
• Reserve Bank of India (RBI) for gross negligence and
not enforcing stricter lending norms,
• Finance Ministry because the government is the
bigger shareholder in public sectors banks.
**And PNB is 2nd biggest public sector bank in India.
12. So how will PNB repay this money to
foreign banks?
Out of 11400 Crores, PNB will try to recover some
of the amount from Nirav Modi’s assets. The rest
will be repaid by the bank using its own money.
The government might infuse some money to help
the bank .
13. Legal Reason:
This case comes under cheating under section
420 of IPC . According to section 420 IPC the
person shall be punished with imprisonment of
either description for a term which may extend
to seven years, and shall also be liable to fine.
This case comes under also Criminal Conspiracy
under section 120 B of Indian Penal Code.
