A set of bank officials in connivance with businesses owned by flamboyant diamond and jewellery merchant Nirav Modi exploited information gaps and lax processes in India’s second largest PSU bank, Punjab National Bank, to defraud it of money that may add up to $1.77 billion, or Rs 11,345 crore. The BJP has dubbed the PNB fraud a “UPA scam”, claiming that a state-run bank was pressured to sanction loan to tainted businessman Nirav Modi in 2013 a day after Rahul Gandhi visited his jewellery exhibition.
The party questioned why the Allahabad Bank approved the loan, purportedly related to Mehul Choksi and Nirav Modi, though it was opposed by one of its directors, and wondered who pressured the bank. The BJP hit back at the opposition Congress which has accused the government of turning a blind eye to information on the alleged scam and the accused fleeing the country.
Congress is said to be behind the scam. On September 13, 2013, Rahul Gandhi visited Nirav Modis jewellery exhibition at a hotel in Delhi and the very next day Allahabad Bank approved the loan to him, despite the fact that it was opposed by one of the banks directors Dinesh Dubey. Congress should come clean on this fraud and make it clear what is the relationship between its chiefs visit to the exhibition and sanctioning of the loan
It is also alleged that the bank officials were pressured by the then UPA government to sanction the loan. While Congress is blaming BJP for supporting Nirvan Modi, it should be remembered that the fraud came to light when the current government decided to clean the entire banking system.
The entire banking system had failed during the UPA rule. The scam remained under the carpet between 2011 and 2014, and it came to light after the NDA government tightened the banking norms The NDA government allowed all enforcement agencies to speed-up the investigation. The government has also confiscated Nirav Modis properties worth over Rs 5,100 crore. It is alleged that Dubey was removed by the UPA government as director of the Allahabad Bank because he objected to sanctioning of the loan
An LoU is a guarantee by the issuing bank to the receiving bank and the companies that it would undertake to pay a certain amount of money on a specific date. NB discovered that at least 2 individuals, deputy manager Gokulnath Shetty and clerk Manoj Kharat, from its Brady House branch in Mumbai repeatedly issued Letters of Undertaking (LoU) to Nirav Modi’s companies and their banks without following the processes, without securing cash reserve or collateral and without recording the transactions in the bank’s core banking software, the system on which the banks’s financial transactions are run and recorded.
Observers suspect round-tripping of funds raised from one bank being used to pay up buyers’ credit for the other bank in this modus operandi. Over 150 such LoUs were issued since the first one was fraudulently issued in 2011. Interestingly, while an LoU expires in 90-180 days, these bank officials are believed to have rolled them over after each expiry, as a result the fraud lay undetected for over 7 years.
The Enforcement Directorate has raided various premises of Nirav Modi belonging to his entities-Firestar Diamonds, Stellar Diamonds, Find Diamond R US and Solar Exports- all across the country and have seized diamonds, precious stones and jewellery worth an estimated Rs5,100 crore. Nirav Modi, his wife Ami (a US citizen), his brother Nishal (a Belgian citizen) as well as his uncle Mehul Choksi, promoter of Gitanjali Gems, fled the country between January 1 and January 6.
Congress looks to be in deep trouble and seems to have scored a self goal. It should come clean on this matter before it is too late.