PNB went to CBI 4 days after stumbling upon Rs 11,394.02 cr fraud

Punjab National Bank has said it filed the first fraud report with the RBI and the CBI four days after it stumbled upon the alleged Rs 11,394.02 crore fraud by diamantaire Nirav Modi, and made regulatory disclosures only after 10 days.
After stock exchanges sought clarifications on the fraud, PNB in a late night filing detailed the sequence of events and how Modi and companies linked to him used fake bank guarantees worth USD 1.77 billion to obtain loans from the overseas branches of Indian banks.
PNB stumbled upon the scam on January 25, 2018, and a fraud report with the Reserve Bank of India on January 29. On that day, a criminal complaint for registration of FIR was also made with the CBI. Stock exchanges were informed of the fraud on February 5.

This was followed by another fraud report being submitted to the RBI on February 7, the day one more complaint was filed with the CBI. On February 13, an FIR was filed with the CBI against Nirav Modi Group, Gitanjali Group and Chandri Paper & Allied Products Pvt Ltd as also a complaint filed with Enforcement Directorate. Stock exchanges were informed the next day, PNB said in the filing.
In the complaint, PNB alleges that Modi and companies linked to him colluded with some of its officers including a former deputy general manager Gokulnath Shetty, who was posted in the foreign-exchange department of its Mumbai branch. They fraudulently acquired guarantees worth USD 1.77 billion to obtain loans from the overseas branches of Indian banks, claiming to need the cash to import pearls.

"On January 16, 2018, the partnership firm of Nirav Modi group approached our branch at Brady House, Mumbai and presented a set of import documents with a request to allow buyers' credit for making payment to the overseas suppliers," PNB said in the filing.

This happened after Shetty had retired.
And since there was no sanctioned limit for the firms, the branch officials asked them to furnish at least 100 per cent cash margin for issuing Letter of Undertaking (LOU) for raising buyer's credit.
"On denial, the firms contested that they have been availing such transactions since past several years," PNB said.

On scrutiny, it was found that earlier LoUs were issued previously and internal messaging system was bypassed by placing instructions via the SWIFT global payment system asking overseas branches of Indian banks to fork out the cash as loans.
PNB said this followed a series of meetings with representatives of Nirav Modi group and Gitanjali group at Delhi and Mumbai "to impress upon them to pay the amount."
"Upon confirming the first maturity of LoUs liabilities on January 25, 2018 as fraudulently credit against bank, an FMR-1 (fraud report format of RBI) was submitted to the RBI on January 29, 2018 amounting to USD 44.22 million equivalent to Rs 280.70 crore (related to three group firms of Nirav Modi)," it said.

On that day, a criminal complaint for registration of FIR was also made to CBI.
On February 7, another fraud report was submitted to the RBI on confirming the maturity of LoUs liability of USD 10.20 million (Rs 65.25 crore) relating to two companies of Gitanjali group promoted by Mehul Choksi.
Further LoUs of USD 59.23 million (Rs 279.28 crore) also matured for Nirav Modi group, it said adding while investigation was on 10 officers/employees were suspended.
Hong Kong branches of Allahabad Bank and Axis Bank were asked to provide all communication with borrower, PNB said.
"On February 12, 2018, on the basis of investigation report, total fraud of Rs 11,394.02 crore in case of unauthorised issuance of Letters of Undertakings, Foreign Letter of Crdits and Inland Letter of Guarantees in the group accounts of Nirav Modi Group and Gitanjali Group and in account of Chandri Paper and Allied Products Pvt Ltd was reported to RBI," it said.