Punjab National Bank scam involving diamond traders Nirav Modi and Mehul Choksi. Bank employees issued fraudulent Letters of Undertaking (LOUs) without collateral to allow Modi and Choksi to secure overseas loans. The fraud was discovered in January 2018, totaling over $1.77 billion. Investigations are ongoing by the Central Bureau of Investigation and other agencies into the individuals involved and systemic failures that allowed the fraud to occur. The scam has severely damaged confidence in Punjab National Bank and highlighted weaknesses in oversight and controls in the Indian public banking sector.

1. Punjab National
Bank Scam
ASWATHY ACHARYA - 01
KANCHAN AKRE - 02
MEHZABIN ANSARI – 03
RIYA APARAJ – 04
CHAITRA BHANDARE -
05

2. INTRODUCTIO
N
❖ 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
andfinancial 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.
❖ Itwas 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

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
365days 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

8. ❖ After the PNB official started scanning the records and didn’t find any such transactions and
then filed a complaint withCBI.
❖ 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 withCBI.

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 otherbanks.
❖ 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 inthe 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 inMumbai.
❖ 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

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 inPNB 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. INVESTIGATIO
N
❖ CBI has registered a case against Nirav Modi on january
29.
❖ PNB registered a case against Nirav Modi, Neeshal Modi,
Mehul Choksi on february13.
❖ The bank initially reported a scam of Rs.280 crores but it
was later realised to be Rs.11,400crores.
❖ 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. CONCLUSIO
N
❖ 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

19. ‘’Shining Diamond trader took
away PNB’s shine’’

20. THANK
YOU!