March 18, 2018

Need more hands to investigate PNB scam: CBI

14 March 2018, 10:47 | Cesar Cruz

Nirav Modi impact: RBI scraps letters of undertaking for import trade credits

Watchdog scraps PNB scam tool

The Punjab National Bank (PNB) will honour claims by peer banks who issued credit to billionaire jeweller Nirav Modi and his uncle Mehul Choksi against guarantees given by PNB, but the payments come with riders, the Economic Times (ET) reported.

In what has been dubbed the biggest fraud in India's banking history, Punjab National (PNB), the country's second-biggest state-run bank, said last month it had been defrauded of about $2 billion.

Indian investigators have so far arrested almost 20 people, including some senior executives of companies owned by Modi and his uncle Mehul Choksi as well as high-ranking officials of the Punjab National Bank, in the bank fraud probe. PNB had previously pegged its exposure to the Gitanjali companies at 61.38 billion rupees. The importer would negotiate the right price for these loans from the foreign branches of other Indian banks and then get these letters issued by a domestic bank. They did not have any pre-approved credit limit either.

"On a review of the extant guidelines, it has been made a decision to discontinue the practice of issuance of LoUs/LoCs for trade credits for imports into India by AD Category–I banks with immediate effect, " the central bank said in a notification. It, however, allowed banks to continue to issue letters of credit and bank guarantees.

Dog dies on United flight after being stored in overhead bin
Of 40 total incidents involving animal loss, injury or death in 2017, 18 incidents involved an animal's death on United Airlines . A dog tragically lost its life on March 12 after its owners were instructed to place him in an overhead bin on a United Flight.

While LOUs allow the customer of a bank to withdraw foreign currency from an Indian bank overseas, LOC is an assurance for payment extended by a third party for imports into India.

Finance Minister Arun Jaitley told Parliament on Tuesday a total 1,213 fraudulent letters of undertaking were issued to Nirav Modi's companies between March 2011 and May 2017. Solar Exports, Stellar Diamonds and Diamond R U.S. belonging to high-end jeweller Modi and Choksi-promoted Gitanjali Gems, Gili India and Nakshatra are alleged to have been involved in the scam.

LoUs and LoCs are used widely in several industries including gems and jewellery, oil and gas, electronic goods, solar panels and metals. According to the CBI statement, the investigation in the case is suffering from manpower crunch.

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