PNB Fraud case: ED conducts raids on Nirav Modi showrooms


Consequently, shares of Union Bank of India settled down 0.95%, Allahabad Bank ended the day down 2.31% and Axis Bank was quoted down 0.17%.

Other Indian financial giants may also be affected by the fraud.

However, PNB had sent the notice after it was found that the fraud had been carried out by the perpetrators in collusion with the staff at one of the branches in Mumbai, wherein one junior level branch official unauthorisedly and fraudulently issued LoUs on behalf of some companies belonging to Nirav Modi group viz.

Based on a complaint from PNB, the Enforcement Directorate (ED) raided Nirav Modi's home, showrooms and offices in Mumbai, Delhi and Surat.

Official sources said the ED filed the case under the Prevention of Money Laundering Act (PMLA) after going through a CBI FIR filed early this month.

Punjab National Bank said on Wednesday that it had "detected some fraudulent and unauthorized transactions" at one of its Mumbai branches.

The bank's filing added: "The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land". Nirav Modi, wife Ami, brother Nishal, and Mehul Choksi are partners in Diamonds R US, Solar Exports and Stellar Diamonds, which has shops in Hong Kong, Dubai, and NY.

Regarding the Mallya comparison made by Congress President Rahul Gandhi, Prasad said that the government has cracked down on the liquor baron and similarly in the PNB fraud case too, the government will act tough.

Addressing the jeweller as "Chhota Modi" in a press conference, Surjewala said that Nirav was part of a delegation travelling with the prime minister despite "the complaint against him".

LoU is a bank guarantee that is issued for overseas import payments after the client (here Modi and his partners) agrees to repay unconditionally.

That's when the bank started its investigation. However, there was never a situation of default, sources in the banking industry said.

As the news broke, the PNB stock took a beating and was down close to 7% at 12:15pm on Wednesday (Feb. 14). That matter involved Rs 280.70 crore. "In the bank these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions".

Mehta said that the fraud began in 2011.

The fraud opened a can of worms that could impact the entire banking industry.

Nirav Modi, who is under investigation for fraud, is a billionaire Indian jeweller whose extravagant diamonds have graced many Hollywood celebrities including Kate Winslet and Naomi Watts. Since they had no pre-arranged credit limit, the branch official asked the companies to put down the full amount as collateral so the bank could issue LOUs to authorise the credit.

Replying to a query, Mehta said, "We detected the fraud on January 3".