PNB may be given 1 year to provision against $2 billion fraud
New Delhi: The Reserve Bank of India (RBI) may provide one year to Punjab National Bank (PNB) for making provisions against the country’s biggest ever banking fraud of Rs12,636 crore allegedly masterminded by billionaire jeweller Nirav Modi.
The bank has written a letter to RBI seeking its opinion on making provisions for the PNB fraud, people with knowledge of the matter said.
Although there is an RBI directive on provisioning to be made in case of a loan fraud, PNB is taking pre-emptive action to deal with this extraordinary situation.
Since there is no precedence of frauds due to fake letters of undertaking (LoUs), RBI is likely to allow PNB to make provision against the $2 billion fraud not exceeding more than four quarters.
PNB had in February lodged an FIR with CBI stating that fraudulent LoUs worth Rs280.7 crore were first issued on 16 January. At the time, PNB had said it was digging into records to examine the magnitude of the fraud.
In that complaint, PNB had named three diamond firms—Diamonds R Us, Solar Exports and Stellar Diamonds—saying they had approached it on 16 January with a request for buyers credit for making payment to overseas suppliers. The bank sought 100% cash margins for issuing LoUs, which was contested by the firms saying they had availed of the facility since 2010.
Nirav Modi, his wife Ami, brother Nishal and uncle Mehul Choksi are partners in Diamonds R US, Solar Exports and Stellar Diamonds.
Among those named accused in the PNB fraud is a deputy manager, Gokulnath Shetty, who was posted at PNB’s foreign exchange department in Mumbai since 31 March 2010. He along with another official, Manoj Kharat, issued fake LoUs to these firms without following prescribed procedure or making entries in the banking system.
On Wednesday, CBI registered a fresh case against Modi in connection with the alleged fraud in credit facilities extended by PNB, causing a loss of Rs321 crore to the bank. The action has been taken on a complaint by the bank on March 4, CBI officials said.
The investigating agency has named Modi, then president (finance) of his Firestar Diamonds International Ltd Vipul Ambani, chief finance officer Ravi Gupta, other directors and officials of the company, and unidentified public servants of the bank, they said.
This is the second CBI FIR in which Modi has been named.
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