Recovering money: Letter to BS on Nirav Modi's Rs 114-bn scam at PNB

The last fortnight has been flush with reports about the Nirav Modi-Mehul Choksi duo allegedly swindled money from the Punjab National Bank (PNB). What is being reported is that letters of undertaking were procured by them from the bank by gaming the system with the connivance of a lower executive of the bank. So they were neither an applicant of loan nor were they a borrowers. They had committed a fraud. Now since no loan was sanctioned to them, presumably there are no documents with the bank such as original deeds of the properties or equitable mortgage agreements. No current asset status report like inventories and book debts were filed by them.

My query is, if all that is stated above is correct, how were the disbursements by PNB to other banks accounted for? Every disbursement needs to find some debit and what were the bank debiting? Were they parking it in the nostro account without the Modi name appearing anywhere? Secondly, Rs 110 billion was disbursed from the branch to other bank branches and there was no requirement of the Modi name being brought in.

Now possession of assets/securities pledged or hypothecated by a borrower can be taken over by banks. But what can the banks do about assets which are not offered as securities? Secondly, if the Enforcement Directorate and the Income Tax authorities take possession of the assets, how will the bank recover its money? Can anyone explain?

Deba Pratim Ghatak   Durgapur

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