Punjab National Bank was defrauded of $1.77 billion in a scam perpetrated by Nirav Modi, a diamond trader, and his associates. Modi fraudulently obtained letters of undertaking from PNB to secure loans from other banks without providing collateral. The fraud was detected in January 2018 when PNB officials noticed fraudulent transactions were not recorded properly. The scam has significantly impacted PNB and other public sector banks through loss of funds and declining share prices. Investigations into the fraud are ongoing along with efforts to recover funds from Modi's seized assets.

1. Presented by:
Shivani agrawal
Ayushi jain
Mohit Sharma
Parul aggarwal
PRESENTATION ON TOPIC
PUNJAB NATIONAL BANK
SCAM(NIRAV MODI)

2. PNB SCAM
“Shining Diamond trader took away PNB's
Shine”

3. 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.

4.  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 .

5. WHO IS NIRAV MODI?
 Nirav Modi is an importer of diamonds. Basically
importers prefer to take loans in foreign
currencies as interest rates on that are lower. In
this case a loan that is taken from any overseas
bank guaranteed by PNB.
 Nirav Modi, the billionaire jeweler who along with
others scammed Punjab National Bank (PNB) of
over 11400 crore’s has fled the country.

7. INTRODUCTION
 On 29th Jan,2018, PNB (Punjab National Bank) filed a
criminal complaint with India`s federal investigative
agency against three companies and four people,
including billionaire jeweller Nirav Modi and his uncle
Mehul Choksi, the managing director of Gitanjali Gems,
saying they had defrauded PNB and caused a loss of 2.8
billion rupees ($43 million).
 In a regulatory filing on Feb. 14, the bank updated the
sum involved in the fraud to 113.94 billion rupees ($1.77
billion), which it said was determined after further
investigation at its Mumbai's Brady branch.
 This fraud is done by Nirav Modi in 2011 who fraudently
raised funds worth of Rs.12,636 crore from various public
& private sector banks by showing Letter of Undertaking
(LOU) issued by Punjab National Bank.

8. PERSONS INVOLVED IN PNB
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)

9. NIRAV MODI
 Nirav Modi is a wanted person in PNB loan scam
and presently he is on a run .
 CBIseeks 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.

10. 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

11. 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.

12.  After the PNB official started scanning the records
and didn’t find any such transactions and then filed a
complaint with CBI.
 Nirav Modi'sfirm 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.

13. 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.

14.  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

15. 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.

16. 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.

17. 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 bra

18. LETTER OF UNDERTAKING
 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.

19. 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.

20. WHO ELSE REPONSIBLE FOR
THIS SCAM?
 PNB’s auditors for negligence.
 Overseas banks such as Allahabad bank, Union
Bank of India & Axis Bank for overlooking
NOSTRO accounts.
 Reserve Bank of India (RBI) for gross negligence
and not enforcing stricter lending norms.
 Finance Ministry because the government is the
bigger shareholder in public sectors banks.

21. So how will PNB repay this money to
foreign banks?
 Out of 11400 Crores, PNB will try to recover some
of the amount from Nirav Modi’s assets. The rest
will be repaid by the bank using its own money.
The government might infuse some money to
help the bank .

22. LEGAL REASON
 This case comes under cheating under section
420 of IPC . According to section 420 IPC the
person shall be punished with imprisonment of
either description for a term which may extend to
seven years, and shall also be liable to fine. This
case comes under also Criminal Conspiracy
under section 120 B of Indian Penal Code.

23. Ethical Issue Involved
•Not following corporate governance norms
•Tempering the financial data
•Misleading the bank as well as government
•Putting self interest first

24. 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.

25. THANK YOU