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PUNJAB NATIONAL BANK SCAM (NIRAV MODI)

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Punjab National
Bank Scam
ASWATHY ACHARYA - 01
KANCHAN AKRE - 02
MEHZABIN ANSARI – 03
RIYA APARAJ – 04
CHAITRA BHANDARE - 05
INTRODUCTION
❖ Punjab National Bank was incorporated bank in the year 1895 in Lahore,
undivided India.
❖ The bank has been distinction of being the first Indian bank has been started
solely with Indian capital in the year 1940.
❖ The bank absorbed Bhagwan Das Bank, a scheduled bank located in Delhi
circle.
❖ Punjab National Bank was nationalized in July 1969 along with 13 other
banks.
❖ They acquired Hindustan commercial with added Hindustan 142 branches
the bank network.
❖ Punjab National Bank is an Indian
multinational banking and financial
service company.
❖ It is state owned corporation based in
New Delhi, India.
❖ The bank was founded in 1894 as of
31st march 2017.
❖ The bank has over 80 million
customers and 6937 branches and
10681 ATMS across 764 cities .
PEOPLE INVOLVED IN THE SCAM
❖ Nirav Modi : Nirav Modi is the owner of the Nirav Modi firm,
Diamond RU.S. ,Stellar Diamond and Solar Exports and the prime
accused in this scam.
❖ Ami Modi : Nirav Modi’s wife.
❖ Nishal Modi : Nirav Modi’s brother in law.
❖ Mehul Choksi : Mehul Choksi is the owner of Gitanjali Group and the
uncle of Nirav Modi.
❖ PNB Employees : Gokul Nath Shetty (retired deputy manager) ,
Manoj Kharat (clerk).
❖ Nirav Modi is a wanted person in PNB
loan scam and presently he is on a run .
❖ CBI seeks the help of interpol to arrest
him.
❖ He is into Diamond trading business .
❖ He is the founder and creative director of
the Nirav Modi chain of Diamond
jewellery.
NIRAV MODI
PUNJAB NATIONAL BANK
❖ PNB was registered on 19th may 1894, under the Indian Companies Act.
❖ It was founded by Dyal Singh Manjithia.
❖ Its first office was in Anarkali Bazaar, Lahore in present date , Pakistan.
❖ After partition PNB moved to India and closed all branches from Pakistan.
❖ On 19th july 1969 the government of India nationalised PNB with other 13
major commercial banks.
❖ In february 2018, Punjab National Bank found itself in the center of one of
the biggest fraud in the Indian banking sector.

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PUNJAB NATIONAL BANK SCAM (NIRAV MODI)

  • 1. Punjab National Bank Scam ASWATHY ACHARYA - 01 KANCHAN AKRE - 02 MEHZABIN ANSARI – 03 RIYA APARAJ – 04 CHAITRA BHANDARE - 05
  • 2. INTRODUCTION ❖ Punjab National Bank was incorporated bank in the year 1895 in Lahore, undivided India. ❖ The bank has been distinction of being the first Indian bank has been started solely with Indian capital in the year 1940. ❖ The bank absorbed Bhagwan Das Bank, a scheduled bank located in Delhi circle. ❖ Punjab National Bank was nationalized in July 1969 along with 13 other banks. ❖ They acquired Hindustan commercial with added Hindustan 142 branches the bank network.
  • 3. ❖ Punjab National Bank is an Indian multinational banking and financial service company. ❖ It is state owned corporation based in New Delhi, India. ❖ The bank was founded in 1894 as of 31st march 2017. ❖ The bank has over 80 million customers and 6937 branches and 10681 ATMS across 764 cities .
  • 4. PEOPLE INVOLVED IN THE SCAM ❖ Nirav Modi : Nirav Modi is the owner of the Nirav Modi firm, Diamond RU.S. ,Stellar Diamond and Solar Exports and the prime accused in this scam. ❖ Ami Modi : Nirav Modi’s wife. ❖ Nishal Modi : Nirav Modi’s brother in law. ❖ Mehul Choksi : Mehul Choksi is the owner of Gitanjali Group and the uncle of Nirav Modi. ❖ PNB Employees : Gokul Nath Shetty (retired deputy manager) , Manoj Kharat (clerk).
  • 5. ❖ Nirav Modi is a wanted person in PNB loan scam and presently he is on a run . ❖ CBI seeks the help of interpol to arrest him. ❖ He is into Diamond trading business . ❖ He is the founder and creative director of the Nirav Modi chain of Diamond jewellery. NIRAV MODI
  • 6. PUNJAB NATIONAL BANK ❖ PNB was registered on 19th may 1894, under the Indian Companies Act. ❖ It was founded by Dyal Singh Manjithia. ❖ Its first office was in Anarkali Bazaar, Lahore in present date , Pakistan. ❖ After partition PNB moved to India and closed all branches from Pakistan. ❖ On 19th july 1969 the government of India nationalised PNB with other 13 major commercial banks. ❖ In february 2018, Punjab National Bank found itself in the center of one of the biggest fraud in the Indian banking sector.
  • 7. HOW DID PNB SCAM OCCUR? ❖ Nirav Modi exported rough store from foreign country worth crores of rupees. ❖ The employees at PNB Brady House branch fraudulently issued LOU for 365 days without making any provisions for collateral and by passing Core Banking System (CBS) . ❖ The firm also raised funds from Indian banks overseas branch for paying to the suppliers. ❖ Nirav Modi's firm again requested the bank to issue another LOU but the official refused on ground that the company has to keep collateral with bank but Modi’s firm argued that no such money was kept on margin for the previous LOU.
  • 8. ❖ After the PNB official started scanning the records and didn’t find any such transactions and then filed a complaint with CBI. ❖ Nirav Modi's firm again requested the bank to issue another LOU but the official refused on ground that the company has to keep collateral with bank but Modi’s firm argued that no such money was kept on margin for the previous LOU. ❖ After the PNB official started scanning the records and didn’t find any such transactions and then filed a complaint with CBI.
  • 9. EFFECT OF SCAM ON PNB & OTHER PUBLIC SECTOR BANKS ❖ Public sector banks will now have to look back on every defaulters, rupees 50 crores and check whether he was genuinely stressed or just fooling them. ❖ The stock price of PNB has fallen down from rupees 160 to rupees 95.5 as on 9th march 2018. ❖ RBI has said to PNB to pay all debts to other banks. ❖ The RBI stop banks to issue LOU (letter of undertaking). ❖ Because of this fraud pnb has lost trust of people.
  • 10. ❖ In case where fraudulent transactions are found, the government want bankers to involve to investigating agencies like the enforcement directorate and their ilk. ❖ This put the approximately rupees 8 trillions worth of bad loan stockpile of the banking sector in the spotlight.
  • 11. HOW WAS THE FRAUD DETECTED? ❖ According to the complaint filed by PNB with the CBI on January 28, the fraudulent issuance of letters of undertakings (LOU) was detected at the mid corporate branch, Brady House in Mumbai. ❖ A set of partnership firm –Diamond R US ,solar exports and Stellar Diamonds –approached the bank on January 16 with a set of import documents and requested buyer’s credit to make payments to overseas suppliers. ❖ 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 LOU to authorize the credit.
  • 12. WHAT WILL HAPPEN NOW ? ❖ One of the worrying aspects of the scam that in its statement , PNB says that based on the fraudulent transaction , 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 liabilities arising out of these on the bank will have to be decided based on the law of genuineness of underlying transactions . ❖ As, of now as reuters opined ,the only good that could come out of the affair would be some fresh consideration to implementing better practices in public sector banking .
  • 13. WHY THE SCAM COULDN'T BE DETECTED EARLIER ❖ The failure of the Auditors - Auditors failed to detect any frauds which took place in PNB branch , Mumbai. ❖ No linkage of SWIFT with CBS - Society for worldwide interbank financial telecommunication (SWIFT) and core banking system (CBS) was not linked with each other. ❖ Management Failure - The management system was very weak and couldn't detect any fraud because the deputy manager of branch himself was involved in the fraud. ❖ No Rotation of Employees - According to reserve bank of India (RBI) guidelines, every employees working in banks should be rotated from one position in every three years but the same was not done in the PNB branch.
  • 14. ❖ A Letter Of Undertaking, or LOU is a document issued by a bank to a person or a firm. This LOU is generally used for international transactions and is issued keeping pin mind the credit history of the party concerned. ❖ The party can then avail Buyer's Credit against this LOU from a foreign bank. LETTER OF UNDERTAKING
  • 15. INVESTIGATION ❖ CBI has registered a case against Nirav Modi on january 29. ❖ PNB registered a case against Nirav Modi, Neeshal Modi, Mehul Choksi on february 13. ❖ The bank initially reported a scam of Rs.280 crores but it was later realised to be Rs.11,400 crores. ❖ Modi and Choksi left India before the fraud came into light . CBI arrested at least 13 people, 7 from bank and 6 from Modi’s and Choksi’s company. ❖ Investigator has also seized their property including jewellery and other luxury vehicles.
  • 16. WHAT’S HAPPENED SO FAR... [LATEST TWEETS AND NEWS]
  • 17. THE SCAM PRESENTED IN A COMICAL MANNER...
  • 18. CONCLUSION ❖ The impact of frauds on entities like banks, and the economic cost of frauds can be huge in terms of likely disruption in the working of the markets, financial institutions, and the payment system. ❖ Besides, these scams can have a potentially weakening effect on confidence in the banking system and may damage the integrity and stability of the economy. ❖ It can bring down banks, undermine the central bank's supervisory role and even create social unrest, discontent and political violence. ❖ The passiveness of banks to fraud has been heightened by technological advancements in recent times.
  • 19. ‘’Shining Diamond trader took away PNB’s shine’’