PNB fraud case: ED raids diamond trader Nirav Modi

Enforcement Directorate (ED) officers searched the Mumbai offices of Nirav Modi after he was accused of cheating state-owned Punjab National Bank (PNB) of 2.8bn rupees ($43.8mn).

On Thursday, central investigation agencies seized diamond and gold jewellery worth Rs 5,100 crore in nationwide searches and initiated the process for revoking Modi's passport, officials said.

"Upon confirming the first maturity of LOUs liabilities on 25.01.2018 as fraudulently credit against the bank, an FMR-1 (fraud report format of RBI) was submitted to RBI on 29.01.2018 amounting to United States dollars 44.22 mio equivalent to Rs.280.70 crore (related to 3 group firms of Nirav Modi)". The official complaint over the $43 million fraud says the two men, along with Modi's wife and brother, worked with a pair of bank employees to get fake "letters of understanding".

Modi himself, quite like liquor baron Vijay Mallya and alleged IPL scam mastermind Lalit Modi, has left the country with his entire family and it's not sure as of now if India even has an extradition treaty with whichever country he is in. PNB has suspended 10 of its officials involved in this case.

On Wednesday, the PNB wrote to the CBI, saying that the fraud had now expanded to the tune of Rs 11,400 crore.

Mehta said PNB would wait for the outcome of investigations, but added it would comply with any regulatory order.

After nearly 24 hours, raids continued at Nirav Modi's boutique in Kala Ghoda in Mumbai.

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They suspected that the scam would not be confined to the PNB alone.

Technically, the bank could have stopped payment - these were actually short term loans, called buyer's credit - at any time on the "letters of undertaking" (LoUs) that it and Modi had signed, allowing Modi to pick up raw diamond from sellers overseas. Modi is one of India's richest men.

In noon trade on Friday, PNB's share was down 3 per cent after sliding more than 18 per cent in the previous two sessions.

Pegging the scam at Rs 30,000 crore, he said the Prime Minister and Finance Minister Arun Jaitley should not remain quite and the government should not merely issue "unsigned" press releases.

PNB MD & CEO Sunil Mehta has said that the bank has the capability to come out of the situation, they just need some "breathing time".

"We await more details, but if the "other banks" have advanced money to overseas suppliers against PNB's letter of credit, PNB would have to honour the payments, in our view, and would have to seek to recover the money from these overseas suppliers", said Morgan Stanley analyst Sumeet Kariwala, in a note to clients on Thursday. He also said Nirav did not meet the PM at Davos but arrived on his own for CII group photo event. It made fresh allegations against Modi to the CBI, according to PTI.

  • Rita Burton