The Punjab National Bank scam relates to fraudulent letter of undertaking worth Rs 10,000 crore issued by the bank.
The key accused in the case were jeweller and designer Nirav Modi, his maternal uncle Mehul Choksi, and other relatives and some PNB employees. Nirav Modi and his relatives escaped India in early 2018, days before the news of the scam became public. PNB scam has been dubbed as the biggest fraud in India's banking history.
How the 10,000-crore scam happened?
Bankers used fake Letters of Undertakings (LoUs) at PNB's Brady House branch in Fort, Mumbai. The LoUs were opened in favour of branches of Indian banks for import of pearls for a period of one year, for which Reserve Bank of India guidelines lay out a total time period of 90 days from the date of shipment.
This guideline was ignored by overseas branches of Indian banks. They failed to share any document/information with PNB, which were made available to them by the firms at the time of availing credit from them.
Nirav Modi got his first fraudulent guarantee from PNB on March 10, 2011 and managed to get 1,212 more such guarantees over the next 74 months.
The Enforcement Directorate (ED) recovered bank token devices of the foreign dummy companies used by the fugitive diamond trader to transfer the fraudulent funds.
The probe agency found that Nehal Modi, brother of Nirav Modi had destroyed the devices and had even secured a server located at United Arab Emirates (UAE) soon after the scam broke out. These dummy firms had been receiving the fraudulent PNB LoUs and were based out in British Virgin Island and other tax havens.
The enforcement agency has so far seized movable and immovable properties to the tune of Rs 2362 crore in the PNB fraud case.
How was the Punjab National Bank management oblivious to this?
PNB employees misused the SWIFT network to transmit messages to Allahabad Bank and Axis Bank on fund requirement. While all this was done using SWIFT passwords, the transactions were never recorded in the bank’s core system — thereby keeping the PNB management in the dark for years.
How did the scam unfold?
On 29 January 2018, PNB lodged a FIR with CBI stating that fraudulent LoUs worth Rs 2.8 billion (Rs 280.7 crore) were first issued on 16 January. In the complaint, PNB had named three diamond firms, Diamonds R Us, Solar Exports and Stellar Diamonds.
As of 18 May 2018, the scam has ballooned to over Rs 14,000 crore.
Who is Nirav Modi?
Nirav Modi is a luxury diamond jeweller and designer who was ranked 57 in the Forbes list of billionaires in 2017. He is also the founder of the Nirav Modi chain of diamond jewellery retail stores.
Modi is the Chairman of Firestar International, the parent of the Nirav Modi chain, which has stores in key markets across the globe.
He has 16 stores in diverse locations such as such as Delhi, Mumbai, New York, Hong Kong, London and Macau.
He is currently in the United Kingdom and is seeking political asylum in Britain.