2. PNB SCAM
• On 14th
February 2018 one of India’s biggest banks
disclosed an almost $2 billion fraud allegedly by one of the country’s
richest men, who deals in pearls and diamonds.
• Shares of the lender, Punjab National Bank, plunged on the
news, dragging down other lenders when it said the scam may
extend to multiple banks.
• Panjab national Bank (PNB) is country’s second –largest
public lender is the middle of a RS.11400 crore transaction fraud
case.
3. Who is Nirav Modi?
• Nirav Modi, the billionaire in the middle of this
controversy, is a luxury diamond jewellery designer who
was ranked #85 in the Forbes list of India’s billionaires
in 2017.
5. • He is the founder and creative director of the Nirav Modi
chain of diamond jewellery retail stores, and is the
chairman of Fire international the parent of the Nirav
modi chain, which has stores in key markets across the
globe.
6. • His designs have been worn to the oscars by “Hidden
Figures” star Taraji p Henson and to the Golden Globes
by Dakota johnson, among others Actor priyanka chopra
is the Brand ambassador.
7. • In a statement issued to stock exchanges on
Wednesday, PNB said that it has detected some “ on the
fraudulent transactions, other banks appear to have
advanced money to the
customers abroad.”
• According to the complaint field by PNB with the CBI on
January 28,the fraudulent issuance of letter of
undertaking (LOU) was detected at the mid corporate
branch, Brady house in mumbai.
8. What is fraud about PND
• A contract to perform the promise or discharge the liability
of a third person in case of his defult
• Inter bank
• High provisioning
• High charges to customer
• Buyers credit in a short term credit available to an
importer(buyer) from overseas lenders such as banks and
other financial institution for goods they are importing.
9. Partnership firms partners
A set of partnership firm :
• Diamond R US
• Solar Export
• Stellar Diamonds
These approached the bank on January 16 with a
set of import documents and requested for buyers credit
to make to payment to overseas suppliers.
The branch officials requested the firms to furnish 110%
cash margin issuing the LOU for rising the buyer’s credit.
At that time, the firms contested that they have been
availing this facility in the past , but the branch records
do not corroborate this.
10. How to Discover the fraud
• After then, the bank officials discovered that two of its
employees had fraudulently issued LOUs in the past
without following prescribed procedures and approvals.
• The employee had then transmitted SWIFT instructions
to the overseas branches of Indian banks for raising
Buyer’s credit without making entries in Banking system
to avoid detection.
11. SWIFT code ?
• Society for worldwide interbank financial
Telecommunication code.
• It is use for An International recognized identification
code for banks around the world.
• SWIFT code are mostly used for international wire
transfer and are comprised of 8 or 11 alphabetic
characters.
12. • As per the FIR, five of the SWIFT messages (SWIFT is a
messages network used by the many of financial
institutions to security transmit instruction) were issued
to Allahabad Bank in Hong Kong and three braches to
Axis bank in Hong Kong.
13. What will Happen Now
• One of the worrying aspects of the scam is that in its
statement, PNB says that based on the fraudulent
transactions, other banks appear to have advanced
money to the customers abroad.
• It goes on to add that these transactions are contingent in
nature and any liabilityarising out of these on the bank will
have to be decided based on the law and genuineness of
underlying transactions.
14. • However, the Rs.11400 crore scam comes at a time
when the central government is attempting to provide a
breather to ailing PSBs, having announced a Rs.2.11
lack crore capital infusion to the second in October 2017.
• For this year, PNB will receive Rs. 5,473 crore as capital
infusion from the government through a mix of
recapitalisation bonds and direct infusions.
