Nirav Modi-PNB Fraud Case Not Out-Of-Control: Finance Ministry

File photo of Punjab National Bank.

(Photo: Twitter/@BloombergQuint)

The finance ministry on Thursday, 14 February, sought to allay worries over the Rs 11,300-crore fraud case at Punjab National Bank (PNB), saying the case is not "out-of-control" and it is taking action in this respect.

"I don’t think this is out of control or too big a worry at this point. That is my broad sense," Joint Secretary in Department of Financial Services Lok Rajan said on the sidelines of an event in Delhi.

Earlier, PNB disclosed that it has detected some fraudulent transactions with financial implication of USD 1.171 billion (about Rs 11,334.4 crore) and the matter has been referred to law enforcement agencies for the recovery.

Based on these transactions, other banks appear to have advanced money to these customers abroad, it said.

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. The quantum of such transactions is USD 1771.69 million (approx), it said.

The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land. The bank is committed to clean and transparent banking, PNB said.

Finance Ministry Asks Banks to Submit Status Report Soon

Concerned over the fraud, the finance ministry has asked all banks to send reports involving this case or other such incidents latest by the end of this week. Since more than one lender is involved, all banks have been asked by the Department of Financial Services to submit a status report soon on the fraud, official sources said.

They said the Letter of Undertaking was issued fraudulently by PNB to Modi and associates and was encashed overseas by them from different banks, both private and public sector. All this was being carried out in connivance with officials as high as Deputy General Manager since 2011, sources added.

As a corrective measure, PNB has suspended 10 employees in connection with the fraud.

The finance ministry has asked, through the reform agenda circulated to the banks on 24 January, that dubious accounts should be scrutinised and appropriate action against fraudsters be taken with zero tolerance, sources said.

Banks should not dither from taking action against their own employees in case of collusion if there is sufficient ground, they added.

The agency received the complaints about the transactions detected by the public sector bank late Tuesday night, the sources said. The allegations are being looked into and future course of action will be decided soon, they said.

This is the second incidence in less than 10 days where a bank has been defrauded. On 5 February, the CBI booked billionaire diamond merchant Nirav Modi, his wife, brother, and a business partner for allegedly cheating PNB of over Rs 280.70 crore during 2017.

The CBI has acted on a complaint from the PNB, which alleged that Modi, his brother Nishal, wife Ami and Mehul Chinubhai Choksi were in conspiracy with officials of the bank and cheated it, causing "wrongful loss".