For the unversed, PNB had detected a $1.77 billion fraud, wherein noted jewellery designer Nirav Modi had acquired multiple letters of undertaking to avail overseas credit from a number of banks
on February 14.
The billionaire businessman, who owns Firestarter Diamond International Private Limited, and Choksi, his uncle, have been accused of defrauding PNB of Rs 12,600 crore, including Rs 1,300 crore being added to the fraud kitty on February 26.
On Thursday, the state-owned lender detected another fraud case at a Mumbai branch, which is at the centre of around Rs 9.9 crore fraud, according to a complaint with the police.
Top 10 developments
1. 11 arrested in PNB scam case
11 accused arrested in the case, including Gokulanath Shetty and Vipul Chitalia, have been sent to judicial custody by a special CBI court till 28th March.
2. Farmers protest against Nirav Modi
Farmers in Ahmednagar's Khandala Village staged a protest 'as a symbol to show their ownership' of the land which they say was acquired from them by Nirav Modi at less than normal rates.
"Nirav Modi had acquired land of the farmers by conning them. We did this (protest) as a symbol to show our ownership of the land. Nirav Modi was given crores by the bank but farmers are not given more than Rs 10,000. We have started a 'Bhoomi Aandolan' against this", said a farmer.
3. Diamond traders move business to organised players
Loose diamond traders have started approaching players in the organised sector for business dealings, due to the latter’s deeper pockets. Many medium and small diamond dealers have moved to large players seeking credit facility within the industry, as most banks
have already tightened lending to diamond merchants, while other lenders are about to follow suit. State Bank of India, early last week announced its decision to tighten collateral demands on borrowers from the gems and jewellery industry.
4. Bank to focus on internal audits, recovery, small depositors
PNB has decided to increase the number of internal audits and increase focus on recovery of bad debts in the aftermath of the Rs 129 billion scam that hit the bank earlier this year.
The decisions were taken in an extraordinary general meeting held by PNB's top management on Friday to approve giving a matching portion to the government through preferential shares as a part of government's bank recapitalisation process. Government will infuse Rs 54.7 billion in PNB in 2017-18 through recapitalisation bonds after which the government's stake in the bank will increase to 62.2 per cent from 57.1 per cent.
During the EGM, the top management reiterated to its stakeholders that the Delhi-based public sector bank will honour all the “bonafide” letters of undertaking.
5. PNB fraud: 107 companies, 7 LLPs under scanner
As many as 107 companies and seven limited liability partnerships (LLPs) are under the scanner following the billion dollar scam unearthed by PNB.
Furthermore, investigation of the select companies, as per the provisions of Section 212(1)(c) of the Companies Act, 2013 and Section 43(3)(c)(i) of Limited Liability Partnership Act, 2008, will be carried out by the Serious Fraud Investigation Office (SFIO), Minister of State (MoS) for Corporate and Law and Justice, P.P. Chaudhary, said in Lok Sabha on Friday.
The minister further noted that investigation of these companies belonging to billionaire businessman Nirav Modi (Firestar Diamond group) and Mehul Choksi (Gitanjali Group) is underway.
6. 25% overseas branches of public sector banks reported losses in FY17
The Union government said on Friday that one-fourth of all foreign branches of public sector banks reported losses last financial year.
"As per data reported by PSBs, 159 branches of PSBs are operating in foreign countries, of which 41 branches were in the loss in the financial year 2016-17," Minister of State Finance
Ministry Shiv Pratap Shukla informed the Lok Sabha on Friday.
The Rs 129 billion scam reported in Punjab National Bank has put the scanner on foreign branches of PSBs as fraudulent transactions through thousands of letters of undertaking (LoUs) allegedly took place between domestic and overseas branches over last seven years in the Nirav Modi and Mehul Choksi case.
7. PNB to honour bonafide LoU; increase its focus on CASA
PNB said it will honour all "bonafide" Letter of Undertakings (LoUs), an instrument which was used by billionaire diamantaire Nirav Modi to defraud the bank of Rs 129.68 billion (Rs 12,968 crore).
The statement was made by top management of the bank at the Extraordinary General Meeting (EGM) which was primarily convened to clear proposal for the capital infusion through issuance preferential shares to the government. PNB reassured its shareholders, customers, partners and employees on the bank's capability and capacity to come out of this situation.
8. RBI feels anger and hurt over bank frauds: In a rare and strongly worded speech, the RBI chief said that the central bank was not detached when it came to the spate of banking frauds in the country, adding that the regulator, too, felt pain and anger over such incidents. "I have chosen to speak today to convey that we at the RBI also feel the anger, hurt and pain at the banking sector frauds and irregularities," Patel said, adding, "In plain simple English, these practices amount to a looting of our country's future by some in the business community, in cahoots with some lenders."
9) RBI had warned banks of vulnerabilities exploited by Nirav Modi & co: Referring to the PNB fraud, the RBI chief said that based on cyber risk considerations, the central bank had identified the exact source of operational hazard through which the fraud was perpetrated. Further, Patel said that the RBI had issued precise instructions through three circulars in 2016 to enable banks to eliminate that hazard.
"It turns out ex post the bank had simply not done so. Clearly, the internal processes at the bank failed in allowing the operational hazard to remain in place in spite of clear instructions to close it," he said. Patel also said that the RBI would undertake actions that it was empowered to take against the bank, adding, however, that this set was limited under its Banking Regulation Act powers over PSBs.
10) RBI needs to work with govt to take action against PSBs, says Rangarajan
C Rangarajan, former head of the country’s Reserve bank (RBI) says the regulator does have formal supervisory powers over government-owned lenders but also needs to work with the state in taking needed action.
He was speaking a couple of days after Reserve Bank governor Urjit Patel had said the central bank did not have adequate leeway in this regard.
“The issues have been raised at various levels. How much control the Reserve Bank has over public sector banks (PSBs) is an issue. In terms of (formal) supervision, it has powers,” the former head of the prime minister’s economic advisory council told reporters on the sidelines of his lecture in the memory of the late Saumitra Chaudhuri, economist and Planning Commission member.