How this famed jeweler duped Punjab National Bank?

How this famed jeweler duped Punjab National Bank?
Highlights

Neerav Modi, the famed jeweler for whom Hollywood’s biggest starks walked the ramp, operated smoothly and used one of the oldest tricks to defraud Punjab National Bank, the second largest public sector bank in the country. He used opened a letter of undertaking  in 2011 in the Flora Fountain branch of the PNB. 

Neerav Modi, the famed jeweler for whom Hollywood’s biggest starks walked the ramp, operated smoothly and used one of the oldest tricks to defraud Punjab National Bank, the second largest public sector bank in the country. He used opened a letter of undertaking in 2011 in the Flora Fountain branch of the PNB.

The LoU is a bank guarantee by the bank to unconditionally repay the principal and the interest on the client’s loan. This LoU was accessed by the bank’s deputy manager to access the SWIFT messaging system of the bank and secure forex credit. The total amount embezzled stands at a staggering Rs 11,365 crore.

The fraud came to light in January this year when the foreign banks did not get their money. They approached the PNB, which found that the LoUs were fraudulent.

The bank has since suspended 10 of its employees and the vigilance officials have raided the premises of Neerav Modi. The investigation is in progress.

This fraud has hit the shares of the PNB badly. Its shares fell by 10 per ent on Wednesday and the slide continued on Thursday too. Several Indian banks with overseas branches too would be affected since the PNB is refusing to be liable to pay the amounts.

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