Rs 114-bn PNB fraud case: Banks ignored potential red flag for two years

Lenders allowed CARE to withdraw ratings for Nirav Modi's company

Banks led by Punjab National Bank (PNB) ignored crucial warnings by CARE Ratings in February 2016 that Nirav Modi’s flagship company, Firestar International Private International (FIPL), had a high leverage, large off-balance sheet exposure and limited customer and geographical spread.

But, in a curious turn of events, on June 7, 2016, the rating agency said it had withdrawn the ratings assigned to the bank facilities of FIPL “with immediate effect” following the receipt of a no-objection certificate (NOC) from the banks.

Modi is the prime accused in an alleged bank fraud of Rs 113.6 billion, revealed by PNB on Wednesday.