MUMBAI – Punjab National Bank, one of India’s biggest banks, has disclosed a massive fraud allegedly by one of the country’s richest men, who deals in pearls and diamonds.
The Central Bureau of Investigation (CBI) is investigating the allegation that Nirav Modi, a jeweler based in Mumbai, and five others defrauded PNB of nearly $2 billion in collusion with a deputy branch manager.
Modi is yet to comment, but reports suggest about a dozen of his premises across India have been raided by police.
In its complaint to the federal investigation agency – the Central Bureau of Investigation – PNB alleged that the fraud was led by Nirav Modi, who is No. 85 on Forbes’s 2017 list of India’s richest people and, at 47, is one of the youngest.
In a regulatory filing, PNB said the transactions were “for the benefit of a select few account holders with their apparent connivance”.
The fraud amounts to nearly a third of Punjab National Bank’s (PNB) market value, and 50 times its profits for the last quarter of 2017. Shares in the bank have fallen by more than 10%.
PNB alleges that Modi worked with a former PNB employee, Gokulnath Shetty, who was posted at a PNB branch in Mumbai from where the fraud originated. Shetty was a deputy general manager in the foreign-exchange department looking after import payments, according to reports in India media.
Meanwhile, the Indian Express reported emergence of an additional 3,000 crore Indian rupees worth of exposure of 17 banks; rolling over of the same Letters of Understanding (LoUs) many times and alleged round-tripping of funds.
In its report, the newspaper claimed as many as 17 banks lent about Rs 3,000 crore to various firms of Nirav Modi, including his flagship firm Firestar International Ltd. These include, besides PNB, Central Bank of India (Rs194 crore), Dena Bank (Rs153.25 crore), Vijaya Bank (Rs150.15 crore), Bank of India (Rs127 crore), Syndicate Bank (Rs125 crore), Oriental Bank of Commerce (Rs120 crore), Union Bank of India (Rs110 crore) and IDBI Bank and Allahabad Bank (Rs100 crore each).
India’s government has asked all banks to send reports involving this case or other such incidents latest by the end of this week, the Press Trust of India reported.