PNB incident shows vulnerability of Indian banking system: Assocham

PNB Fraud Case Priyanka Chopra Mulling Termination Of Contract With Nirav Modi

The opposition party had also raised questions on whether Nirav Modi had been tipped off following which he left the country. The $1.8 billion fraud is done on non-fund based transaction.

Jaikishan J Parmar, Research Analyst told IANS that, "Some other banks in addition to PNB might be impacted as they too have given loans to these clients overseas", he said.

The Enforcement Directorate had registered a PMLA case against them and others based on a CBI FIR which was the result of a PNB complaint.

The bank sought 100 per cent cash margins for issuing LoUs for raising buyers credit, which was contested by the firms saying they had availed of the facility from as early as 2010.

He said the bank has lent $212 million to Modi on the basis of an LoU issued by PNB.

However, exploiting the information gap-and the fact that unlike other Indian banks PNB had not integrated its SWIFT network with the bank's core banking network- they chose not to record these transactions in the bank's own system.

These suspect bank officials issued the LoUs and informed these branches via the global cash transfer service called SWIFT (Society for Worldwide Interbank Financial Telecommunication) which connects all global banks worldwide.

Modi and firms linked to him, Solar Exports, Stellar Diamonds and Diamond R United States, are now being formally investigated by India's premier investigative agency, the Central Bureau of Investigation (CBI).

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The top PNB official, however, refrained from providing details as the investigations were going on.

The finance ministry is of view that the Rs 2.11 lakh crore bank capital package announced a year ago is adequate and will substantially increase their ability to support credit growth.

In the complaint, PNB alleges that Modi and companies linked to him colluded with some of its officers including a former deputy general manager Gokulnath Shetty, who was posted in the foreign-exchange department of its Mumbai branch.

Over 150 such LoUs were issued since the first one was fraudulently issued in 2011.

A fortnight after the scam was first reported, PNB Chairman and Managing Director Sunil Mehta yesterday said it has the capability to recover the dues from Nirav Modi and promised to take action against all wrongdoers. When banks issue LoUs for a client (Nirav Modi in this case), they agree to repay the principal and interest on the client's loan unconditionally.

He, however, said that the bank will honour all its bonafide commitments.

Meanwhile, the ED seized jewelleries, gold, diamond, precious metal and stones at stock price of ₹5,100 crore in relation to the case late Thursday night and began independent valuation of each other items.

During his business reign as a diamantaire, Nirav gained a reputation as India's jeweler to the stars as Hollywood A-listers from Kate Winslet and Dakota Johnson to Taraji P Henson walked the red carpet in diamonds from his eponymous brand.

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