The Punjab National Bank (PNB) left everyone stunned when it announced last week that fraudulent transactions worth nearly Rs 11,400 crore were made at one of its branches in Mumbai. In connection with the scam, the bank filed a complaint against three companies and four people, including billionaire jeweller Nirav Modi and Mehul Choksi, the managing director of Gitanjali Gems Ltd, saying they had defrauded the bank and caused a loss of nearly Rs 280 crore.
Here is how the scam, by far the biggest ever detected by an Indian bank, came to light.
On 16 January 2018, billionaire Nirav Modi's company sought a letter of undertaking (LoU) from the Mumbai branch of the Punjab National Bank. However, by then Gokulnath Shetty, Deputy Manager of the bank who is accused of being the main facilitator for providing LoUs for Nirav Modi in the past, had retired. The company then approached Shetty's successor at the bank for the letter but unfortunately for Nirav Modi, the deal with the new official did not fall in place, say sources.
The new Deputy Manager apparently asked the company to submit 100 percent margin as a deposit. But the company retaliated saying that never in the past had they been asked to submit any such amount to get the LoUs. On knowing this, the Deputy Manager got suspicious and alerted the bank. The bank then began to fish out the details and begin probe.
In the past, whenever Nirav Modi's company wanted any LoU, Shetty had been able to successfully conspire and materialise a way out to get it issued illegally. It was with the help of these fraudulently issued LoUs that the company approached the foreign branches of Allahabad Bank and Axis Bank and executed the Rs 280.7 crore fraud.
As per the FIR lodged with the CBI, Shetty transmitted SWIFT instructions to the above-mentioned banks for raising buyers credit and for funding the Nostro accounts of PNB, without due procedure. The LoUs were issued on behalf of Diamond R US, Solar Exports, Stellar Diamonds.
While PNB was trying to figure out the fraudulent transactions in January this year, the term of these LoUs which were issued by the Mumbai branch of the bank was due to end. The other banks approached the PNB to recover the loan amount. It was then that the PNB figured out what was going on and the scam was unearthed.
The PNB sent out an urgent alert message to all the other banks stating that if they too have received such a letter, it needs to be verified.
The raids by the Enforcement Directorate are now on at Nirav Modi's properties across India. He with his family, however, is safely parked outside the country, reportedly in New York.
Meanwhile, after being on the run since the scam came to light, Gokulnath Shetty was on Saturday arrested by the CBI. Along with Shetty, Manoj Kharat, the single window operator (SWO) and Hemant Bhat, the Authorised Signatory of the Nirav Modi Group of Firms, have also been arrested.