Nirav Modi Scam

Nirav Modi Scam is one of the biggest in recent times in Banking sector and it reflects how Indian banks are still vulnerable when it deals with Corporate loans and celebrities industrialists.

The current news cycle is dominated by the Punjab National’s Bank’s announcement last week that fraud transactions worth Rs 11,400 crore were committed at a single branch in Mumbai. Nirav Modi, a billionaire who has made his wealth in the diamond business, is the central figure here. This fraud was committed right under the nose of India’s second-largest public-sector bank.

On 14 February, when the local stock markets opened for trading, the government-owned lender informed the stock exchanges that it had detected a fraud of $1.8 billion (around Rs11,400 crore), shaking the financial community and the nation at large. As the day progressed, it became clear that the PNB fraud was engineered by companies of diamond tycoon Nirav Modi, helped along by bank officials at its Brady House branch in Mumbai, the country’s financial capital.

In 2010, Modi became the first Indian jeweler to be featured on the cover of Sotheby’s and Christie’s auction catalogues. Modi’s jewels also fetched Rs 60 crore at the Christie’s auction way back in 2010. But Modi’s ambitious plan to have 100 boutique retail stores worldwide by 2025 seems to have been cut short following the allegations of one of India’s biggest banking fraud.

The PNB fraud surfaced (Nirav Modi Scam) after one of the key accused bank officials retired. When Modi’s executives came calling for a letter of undertaking, or LoU, essentially a bank guarantee against which another lender gives a foreign currency loan, the new official in charge demanded the mandatory collateral. Modi’s executives insisted they had never given collateral before, raising a red flag. An internal investigation showed the bank had issued hundreds of unauthorized PNB LoUs to Modi and his uncle, MehulChoksi of Gitanjali Gems Ltd, baring the bank fraud that proceeded undetected for the past seven years.

PNB has suspended 10 officers over the Rs 11,400 crore scam and referred the matter to CBI for investigation. According to media reports, Nirav Modi left the country on January 1 weeks before the CBI received complaint from PNB on January 29.

The bank fraud (Nirav Modi Scam) is the second largest in India after government-owned UCO Bank was found to have advanced $3.2 billion in export advances to Iran against overseas sales that were never made. The PNB fraud showed the ease with which fraudsters could game the system.

Considering the ensuing backlash after the billionaire left the country, a multi-agency probe is underway as investigators conduct searches at PNB branches and Nirav Modi’s properties considering the gravity of Nirav Modi Scam.

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