PNB fraud going on since 2010, CBI tells court: Top 10 developments

CBI arrested four officials of Nirav Modi, Mehul Choksi's companies. on Monday Vipul Ambani and five others were sent to 14-day judicial custody

Last month, Punjab National Bank (PNB)detected a Rs 126 billion scam, in which diamond trader Nirav Modi acquired fraudulent letters of undertaking from one of its Mumbai branches for overseas credit from other Indian lenders. The scam started in 2011 and was detected in the third week of January this year, after which the PNB officials reported it to the concerned agencies. On Sunday, CBI arrested four officials of Nirav Modi, Mehul Choksi's companies. Today, Vipul Ambani and five others were sent to 14-day judicial custody.

Here are top 10 developments

1. Violation of norms for issuance of Letters of Undertaking (LoUs) to benefit billionaire jeweller Nirav Modi and his uncle Mehul Choksi had been going on since 2010, the CBI told a court here today.

The agency, which secured a 12-day remand of four accused arrested yesterday, explained the modus operandi involved in the alleged Rs 12,636-crore Punjab National Bank (PNB) fraud before the special CBI court here.

An LoU would be issued to one of the firms of Modi and Choksi, and after the money was credited to the applicants' account, a new LoU would be obtained to "adjust" the earlier one, the CBI lawyer said.

This had been going on since 2010, the lawyer said, while seeking remand of four accused including Aniyath Shiv Raman Nair, Director of Gitanjali Group of Companies of Choksi.

2. CBI questions PNB general manager in Nirav Modi fraud case

The CBI today questioned a general manager of Punjab National Bank, who handles the treasury section, in connection with the alleged Rs 12,636-crore fraud perpetrated by billionaire jeweller Nirav Modi and his uncle Mehul Choksi. "PNB General Manager (Treasury) S K Chand is being questioned by the CBI in the bank fraud case," an agency official said.

3. Disgruntled BJP MP Shatrughan Sinha today attacked the Narendra Modi government over issues such as demonetization, the PNB scam and the escape of its key accused to foreign countries.

Sinha was critical of the Centre for its inability to capture Nirav Modi and Mehul Choksi, key accused in the Rs 120 billion PNB fraud case, who have reportedly fled the country.

4. Vipul Ambani, others sent to 14-day judicial custody

A special Central Bureau of Investigation (CBI) Court on Monday sent Vipul Ambani, president (Finance) of Nirav Modi's Fire Star Diamond and five others to judicial custody till March 19. Along with Ambani, the five others are Arjun Patil (senior executive, Firestar group), Kapil Khandelwal (CFO, Nakshatra group), Niten Shahi (manager, Gitanjali), Rajesh Jindal and Kavita Mankikar (executive assistant) and authorised signatory of the three accused firms.

5. Opposition wants debate in LS on PNB fraud tomorrow

Major opposition parties today demanded a debate on the issue of 'bank fraud' in the Lok Sabha tomorrow and told the government that other matters should be discussed only after that.

The proceedings of the Lok Sabha today saw frequent disruptions as opposition parties raised the issue of the PNB fraud.

The House was later adjourned for the day.

6. Female employee at Fire Star Diamond moves HC against arrest after sunset

Kavita Mankikar, in her petition, claimed that she was arrested on February 20 at 8 pm by officials of the Central Bureau of Investigation (CBI), contrary to the provision of law which says a woman cannot be arrested after sunset.

She was arrested along with five others, including Vipul Ambani, the president (finance) of Modi's Fire Star Diamond.

Mankikar was remanded in CBI's custody till today.

Mankikar was Modi's executive assistant and authorised signatory of three of his group firms - Diamond R US, Stellar Diamond, Solar Exports.

7. P Chidambaram's 80:20 gold scheme aided Mehul Choksi: Ravi Shankar Prasad

"There was a scheme 80:20 introduced in August 2013 and repealed in November 2014. On 16th May, 2014, the date of the declaration of results, the then finance minister gave 'aashirvaad' to seven private companies under 80:20 Scheme.

One of those companies was Gitanjali," alleged Union minister Ravi Shankar Prasad on Monday.

"Chidambaram & Rahul Gandhi must answer why was this passed on the day of results to benefit these seven private companies," Prasad said.

8. How loopholes in PSBs' systems were flagged but never fixed until PNB fraud

 The RBI takes a hands-off approach: Its inspections concentrate on whether the broader systems are sound, not the details of what's happening in a particular banking operation.

- External auditors approved by the RBI, known as statutory auditors, in many cases only do top line reviews, not in-depth inspections. In Punjab National's case they have been changed regularly - 18 different firms used over seven years. Though the auditors swapped hand-off notes, no one auditor was able to delve into the bank's operations for any extended period.

- Those external auditors met with Shetty, but their audits of Punjab National published in the bank's annual reports from 2011 to 2017 did not raise alarms.

- The RBI knew by 2016 there was a laundry list of problems at Indian banks that the central bank said "exposed the bank to heightened risk of fraudulent activities".

- The central bank did not compel state banks to link their banking software with the SWIFT global interbank messaging network, a key vulnerability in the Punjab National fraud.

9. Trade finance hit as caution prevails, premium soars

In what can impact the exim trade, the Rs 126 billion Nirav Modi scam at Punjab National Bank has affected trade finance activities as lenders have become extra cautious, while the premium on Indian paper has shot up by 10-50 bps, say bankers.

"The PNB fraud has already affected trade financing. No bank is now prepared to extend letters of understanding (LoUs). The ability of a company to raise money through LoUs from abroad has been affected badly," a senior official from a state-run bank has told PTI.

10. DRI sanctions prosecution of Nirav Modi's firms

The Directorate of Revenue Intelligence (DRI) on Sunday sanctioned the prosecution of Nirav Modi and his three firms in connection with the billion dollar fraud. The decision was taken as per the guidelines of the Central Board of Excise and Customs (CBEC) on the prosecution of persons in duty evasion cases.

Modi will be prosecuted for misdeclaration of value and quantity of the imported Cut and Polished Diamonds, Pearls to Customs and diversion of the Duty Exempted goods to the domestic tariff area clandestinely.

CBI arrests 4 officials of Nirav Modi, Mehul Choksi's companies

CBI has arrested two employees and an auditor of the Nirav Modi group of companies, while a director of the Gitanjali group of companies owned by Mehul Choksi has also been taken into custody.

Manish K Bosamiya, the then AGM (operations) of Firestarter International Ltd owned by Nirav Modi, and then finance manager Miten Anil Pandya, were arrested for their alleged role in the preparation of applications for fraudulent letters of undertakings (LoUs) submitted to PNB.

Auditor Sanjay Rambhia, partner in the chartered accountancy firm Sampat and Mehta, Mumbai, has also been arrested, the officials said.
 

The CBI has also arrested the then Director of Mehul Choksi's company, Gili India, Aniyath Shiv Raman Nair.