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Nirav Modi-PNB Fraud: The 7 Agencies Probing India’s Biggest Banking Scam!

Despite the efforts of our investigating agencies, it seems like they are closing the stable door after the horse has bolted.

The current news cycle is dominated by the Punjab National’s Bank’s announcement last week that fraudulent 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.

There are many dimensions to what many consider as the biggest scam in Indian banking history. Essentially, this is about fake bank guarantees/Letters of Understanding (LoUs).

Nirav Modi (Source: Facebook/Nirav Modi)
Nirav Modi (Source: Facebook/Nirav Modi)

Firms associated with Nirav Modi got fake LoUs from the Punjab National Bank (PNB), which is distributed to other banks stationed overseas seeking credit.

In other words, these LoUs guaranteed other banks, and in this case, especially Allahabad Bank, that PNB would pay back any loans extended to a company linked to Nirav Modi.

Unfortunately, these LoUs were fake and PNB had no idea that it was promising to pay back loans granted to those firms.

The scale of this scam is enormous. From 2011, firms connected to Nirav Modi and his maternal uncle Mehul Choksi have allegedly swindled PNB of Rs 11,400 crore. To put that figure in perspective, it is one-third the bank’s market capitalization before the scam came to light, and more than double the amount the Centre deposited into PNB to deal with its bad loan problem.

Mehul Choksi (Source: Facebook/India Bullion and Jewellers Association Ltd)
Mehul Choksi (Source: Facebook/India Bullion and Jewellers Association Ltd)

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.

This is an extensive probe which will spread across several continents, and the scam could potentially affect many other public-sector banks. Banks are still figuring out their total exposure, as a result of this scam. Meanwhile, the Centre has sought the aid of seven agencies both at home and abroad to probe this entire scam, reports the Hindustan Times.

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Central Bureau of Investigation

India’s premier investigating agency, which works under the Ministry of Home Affairs, has already filed two First Information Reports (FIRs). They have arrested two mid-level PNB bank officials and a senior employee from Modi’s firm. Its first FIR, filed on January 31, deals with 150 fake LoUs amounting to Rs 6498 crore issued to Modi’s firms. The second, meanwhile, deals with additional fake LoUs amounting to Rs 3,032 crore and Rs 1854 crore in illegitimate foreign letters of credit (FLCs) extended to three firms under Modi’s maternal uncle Mehul Choksi. The CBI’s remit here is to investigate charges of corruption and criminal conspiracy in extending fake LoUs and FLCs.

Interpol

New Delhi has approached the International Criminal Police Organisation (Interpol), which facilitates international police organizations, to track Nirav Modi and his family. According to the Press Trust of India, the CBI requested Interpol to issue a Diffusion Notice.

“This [diffusion] is less formal than a notice but is also used to request the arrest or location of an individual or additional information in relation to a police investigation. A diffusion is circulated directly by an NCB [CBI in this case] to the member countries of their choice, or to the entire INTERPOL membership and is simultaneously recorded in Interpol’s Information System,” says the Interpol website.

Diamonds aren't forever. For representational purposes only. (Source: Wikimedia Commons)
Diamonds aren’t forever. For representational purposes only. (Source: Wikimedia Commons)

Income Tax Department

The country’s premier income tax collection body has filed cases against Modi and under the Income Tax Act 2015, and the Centre’s very own Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. They have temporarily seized 29 immoveable properties belonging to Modi, his wife and maternal and other companies associated with the family. Besides, the IT Department has also attached 105 bank accounts of Modi and his associates. Prosecution proceedings against Modi under the IT Act are slated to begin on February 27.

Enforcement Directorate

The financial investigative arm of the government under the Ministry of Finance has registered two Enforcement Case Information Reports (ECIRs) based on the CBI’s FIRs against Modi and Choksi over charges of money laundering. In the raids conducted on firms connected to Modi and Choksi and several other properties, jewellery worth Rs 5694 crore was reportedly seized, although The Better India cannot verify this figure.

Although they’ve called both of them for questioning on February 23, it’s highly unlikely that they’ll make an appearance after leaving the country.

Central Vigilance Commission

The apex Indian governmental body set up to address governmental corruption has summoned senior PNB officials to explain how the bank suffered these losses right under their noses, reflecting a gross failure of vigilance. According to The Indian Express, CVC ordered PNB officials to investigate how the irregularities went undetected for seven years given despite audits each year. Bank officials were also asked to reassess and revamp their entire regulatory mechanism.

Read also: How Can India Rid Our Politics of Money, Muscle Power? 

Ministry of Corporate Affairs

The ministry has reportedly identified as many as 150 shell companies related to Modi, his relatives and associates, through which they were routing their ill-gotten wealth.

Read also: Bank Gives Life-Changing Loans to Nomadic Tribes Based Just on Trust!

Ministry of External Affairs

After suffering the embarrassment of letting Modi and Choksi leave India, the government has decided to suspend their passports for four weeks, thus restricting their travel. If they do not respond to the MEA’s suspension notice for four weeks, their Indian passports will be deemed null and void, say reports.

Despite the apparent efforts of our investigating agencies, it might be that the nation is closing the stable door after the horse has bolted.

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