All About The PNB Scam: 10 Points (image:x.com/KantInEast)

On Monday, Punjab National Bank (PNB) announced that in 2018 it had discovered a massive fraud which has shaken the country’s economy. This crime involved high-profile individuals including billionaire jeweler Nirav Modi and his uncle Mehul Choksi. Choksi was arrested on Saturday in Belgium.

• Nirav Modi and his uncle Mehul Choksi, the managing director of Gitanjali Gems, had allegedly manipulated the bank’s system to obtain fraudulent Letters of Undertaking in collusion with a few rogue bank officials, allowing them to siphon off massive sums under the guise of trade finance.

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• The first fraud report was filed by the bank with the Reserve Bank of India on January 29, 2018, which was followed by a criminal complaint to the CBI.
• Similarly, a second fraud report and CBI complaint was filed on February 7. Following this, an FIR was registered against the Nirav Modi Group, Gitanjali Group, and Chandri Pepper and Allied Products Pvt. Ltd.
• In parallel to the CBI investigation, the ED also joined in alleging money laundering.
• The central instrument used by the individuals to execute the scam was LoUs, which are bank-guaranteed short-term credit for business purposes from overseas branches of Indian banks.
• These are not issued against general retail transactions and are instead used for business or trade transactions.
• According to the investigators, Nirav Modi had acquired the LoUs from PNB’s Brady House branch in Mumbai in March 2011. Over the six years, he had obtained 1,212 such guarantees. At the same time, 53 genuine LoUs were issued to his company during the same period.
• They fraudulently acquired guarantees worth $1.77 billion or ₹11,400 crore to obtain loans from the overseas branches of Indian banks, claiming to need the cash to import pearls.

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• Following the scam, Nirav Modi fled India in 2018, days before the case was registered.
• The Enforcement Directorate (ED) alleged that Choksi and his firms cheated PNB in connivance with corrupt bank officials. He too fled India shortly before the scam was exposed.