The Central Bureau of Investigation has received two complaints from the Punjab National Bank against billionaire diamantaire Nirav Modi and a jewellery company alleging fraudulent transactions worth about Rs 11,400 crore, officials said on Wednesday.
Modi, whose jewellery creations are popular among global celebrities, may face a fresh CBI probe as the agency is looking at suitable legal action to be taken in the case.
He is already being investigated by the CBI for alleged cheating and fraud involving Rs 280 crore at a PNB branch, the officials said.
They said it had received two complaints from the PNB on Tuesday in which it was alleged that the bank had spotted fraudulent transactions worth over Rs 11,400 crore involving Modi and a jewellery company.
The officials, without divulging the future course of action on the complaints from the national bank, said suitable legal action could be initiated against the designer and the company after the agency had vetted the complaint.
It was not immediately clear whether the jewellery company mentioned in the complaints was linked to Modi.
BSE notified
Meanwhile, the bank had also intimated stock exchange BSE about the “fraudulent and unauthorised” transactions worth over USD 1771.69 million in one of its branches in Mumbai.
In its filing at the BSE, the PNB said the bank had detected some fraudulent and unauthorised transactions in a Mumbai branch.
“Based on these transactions other banks appear to have advanced money to these customers abroad,” it said, adding that the matter had been referred to law enforcement agencies to examine the case and book the culprits.”
The intimation did not say if these transactions were linked to Modi.
Officials in the agency, however, confirmed that the transactions cited by the bank in its complaint were linked to Modi and a jewellery company, whose name they have withheld.
No official comments were available from the agency on the issue or the nature of the transaction.
Who is Nirav Modi?
The designer, himself a celebrity, grew up in Belgium’s Antwerp — the diamond capital of the world — and started his own brand by the name of ‘Nirav Modi’.
His name first appeared in a CBI case earlier this month after the agency registered a case against him and Mehul Choksi, who runs a jewellery and gem store chain with the brand name Gitanjali, for alleged cheating and forgery worth Rs 280 crore on a complaint from the public sector bank, PNB.
Concerned over fraud of over Rs 11,300 crore at Punjab National Bank, the finance ministry has asked all banks to send reports involving this case or other such incidents latest by the end of this week.
How the scam was worked
Earlier in the day, PNB disclosed some fraudulent transactions with financial implication of USD 1.77 billion (about Rs 11,334.4 crore).
The bank has detected some fraudulent transactions in one of its branches in Mumbai for the benefit of a few select account holders with their apparent connivance, PNB said in a statement.
Based on these transactions, other banks appear to have advanced money to these customers abroad, it said.
Since more than one lender is involved, all banks have been asked by the department of financial services to submit a status report soon on the fraud, official sources said.
They said the Letter of Undertaking was issued fraudulently by PNB to billionaire diamond merchant Nirav Modi and associates and was encashed overseas by them from different banks, both private and public sector.
All this was being carried out in connivance with officials as high as deputy general manager since 2011, sources added.
As a corrective measure, PNB has suspended 10 employees in connection with the fraud.
The finance ministry has asked, through the reform agenda circulated to the banks on January 24, that dubious accounts should be scrutinised and appropriate action against fraudsters be taken with zero tolerance, sources said.
Banks should not dither from taking action against their own employees in case of collusion if there is sufficient ground, they added.
Fraud ‘not out of control’
Meanwhile, the finance ministry today sought to allay worries over the Rs 11,300-crore fraud case at Punjab National Bank, saying the case not “out-of-control” and it is taking action in this respect.
“I don’t think this is out of control or too big a worry at this point. That is my broad sense,” joint secretary in the department of financial services Lok Rajan said on the sidelines of an event in New Delhi.
PNB scrip takes a beating
On the stock exchanges, meanwhile, shares of Punjab National Bank plunged 10 per cent after the State-run bank detected financial fraud of over Rs 11,300 crore in one of its branches in Mumbai.
Other PSU banks were under pressure too and fell by up to 8 per cent after the Reserve Bank of India (RBI) came out with new norms for recognising stressed assets.
The stock of PNB settled at Rs 145.20 on the NSE, a slump of 10.29 per cent from its previous close. During intra-day trade, the scrip had touched a low of Rs 145.15.
Similar movement was witnessed on the BSE, as the scrip closed 9.81 per cent lower at Rs 145.80. It had opened at Rs 160 and soon touched an intra-day low of Rs 144.70.
Following the decline in the counter, the market capitalisation of the company eroded by Rs 3,844 crore to Rs 35,365 crore.
In a regulatory filing to stock exchanges today, PNB said it has detected some fraudulent transactions with financial implication of USD 1.77 billion (about Rs 11,335 crore), and the matter has been referred to law enforcement agencies for recovery.
The bank has detected some fraudulent and unauthorised transactions (messages) in one of its branches in Mumbai for the benefit of a few select account holders with their apparent connivance, PNB said.
Based on these transactions, other banks appear to have advanced money to these customers abroad, it said.
Among other banking counters, State Bank of India (SBI) declined 4.06 per cent to end at Rs 276.80.
Bank of India lost 7.87 per cent, followed by Allahabad Bank (7.79 per cent), Oriental Bank of Commerce (7.43 per cent), Canara Bank (5.82 per cent), Syndicate Bank (4.49 per cent), IDBI Bank (4.22 per cent) and Bank of Baroda (1.75 per cent).
“The PSU banking space was the party spoiler today as we saw massive cut in individual names within this basket. Going ahead, one needs to keep a close eye on this basket as follow-through selling may result in further dampness in the market,” said Sameet Chavan, chief analyst-technical and derivatives at Angel Broking.
On Monday, after close of market hours, RBI came out with a revised framework for expeditious resolution of bad loans, harmonising the existing guidelines with the norms specified in the Insolvency and Bankruptcy Code.
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