PNB Scam: When Business Turns "Easy": Presented By: Group 4 (16 Members)

PNB SCAM: WHEN BUSINESS TURNS “EASY”
Presented by: Group 4 (16 Members)

Introduction
SCAM: Fraudulent & deceptive act used to cheat someone and it can be
of any scale
PNB is incorporated in 1895 and nationalised in 1965
Indian multinational banking & service company
2nd largest bank in India
Has over 80 million customers
Recently in limelight for the SCAM associated with it

Who Nirav Modi is ?
Business
1. In 1999, he founded Firestar.
• Nirav Modi 2. In 2002, he starts jewellery manufacture.
• International Diamond trader 3. In 2010, he started designer Diamond
stores.
Stores
Recognitions 4. In 2014, opens his first flagship store
1. In 2013, featured on Forbes list of Indian 5. In 2015, Kala Konda store .
Billionaires.
6. Launched boutiques in New York city &
2. In 2017, ranked 57th in Forbes list Hong Kong.
3. His net worth is $ 1.73 billions.
What exactly the scam is
?
Is Nirav Modi alone responsible
?
Shining diamond trader took away shine of PNB
ANATOMY OF PNB
SCAM
LOU
NOSTRO
S.W.I.F.T. Account
Local bank Overseas bank Payments
Letter of Undertaking (LOU)

Society for Worldwide Interbank Financial
 LOU is a document provided by local Telecommunications (S.W.I.F.T)
bank to the overseas bank, which
assures the return of the loan taken by  Global cash transfer messaging service
its client from the overseas bank.  3 levels of encrypted security feature.
 LOU’s are delivered through SWIFT.
 Instrument used by Nirav Modi for the
scam
Banking
Policies
PNB
SCAM
Anatomy
of Scam
Details of LOU issued not
recorded in the CBS
Nirav Modi approaches

Rogue employees sends
PNB for LOU for availing
SWIFT messages offering
buyer’s credit from a
unauthorized LOU’s
Overseas bank
Not knowing clients credit

He instead opted to avail history, overseas bank
another credit to settle the extends credit based on
previous due. LOU’s
Having used the imported

stones for jewellery
business he should have
repaid the dues with PNB
Over 300 LOU’s where
Failed to integrate S.W.I.F.T issued in 7 years, 151 in
& C.B.S 2017 alone.
Mistakes PNB
Committed
No credit limit, Rotation of employee,
Maker-Verifier-Approver chain,
No Margin, No communications recorded for
No collateral ! LOU’s
Whistle-Blower
 In this scam Mr. Hari Prasad acted as a whistle-blower.
 A detailed letter was written by him to PMO in July 2016 brings
in notice about the ongoing scam in PNB.
 He warned PMO that loan cannot be recovered and prompt
action is required in this matter.
 No actions were taken by PMO neither by CBI nor by ED.
 In return, he received a letter from PMO stating that the case
filed by him has been closed after enquiry.

Consequences : How is it affecting you ??
Estimated Money lost per head

=11,400 Cr./132 Cr
= approx. 87 Rs.
 Share prices of PNB Bank fell

by 10% approx. at the time of
Scam
 Share prices of Gitanjali

Gemss fell by 50% approx. at
the time of Scam
Actions taken Under LAW
 On 29 Jan 2018, PNB filed a complaint with CBI against Nirav Modi, Ami Modi, Nishal Modi, Mehul Choksi
& 2 Bank officials.
 On 1 March 2018, the government approved the Fugitive Economic Offenders Bill including Benami assets of

absconding loan defaulters.
 In March 2018, the Reserve Bank of India scrapped banking instruments such as the Letter of

undertaking (L.O.U) and Letter of Comfort (LoC) that in an attempt to plug a loophole and improve banks’ due
diligence in trade credit.
 On 18 May 2018, CBI approached the Interpol to issue red corner notice (RCN).
 On 19 Mar 2019, he got arrested in central London.
 In March 2020, Enforcement Directorate (ED) auctioned 72 Luxurious items seized from him for 2.29 Crores.
 On 8 June 2020, The prevention of Money Laundering Act (PMLA) court has ordered a seize of nearly Rs.
1400 crore worth property of Nirav Modi.
LESSONS
Stricter norms needed to be applied to defaulters.
Existing Loop holes were discovered in the current banking system
Human interference needed to be minimized

THANK YOU !!

PNB Scam: When Business Turns "Easy": Presented By: Group 4 (16 Members)

Uploaded by

Copyright:

Available Formats

PNB Scam: When Business Turns "Easy": Presented By: Group 4 (16 Members)

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PNB Scam: When Business Turns "Easy": Presented By: Group 4 (16 Members)

Uploaded by

Copyright:

Available Formats

PNB SCAM: WHEN BUSINESS TURNS “EASY”

Presented by: Group 4 (16 Members)

PNB is incorporated in 1895 and nationalised in 1965

Indian multinational banking & service company

2nd largest bank in India

Has over 80 million customers

Recently in limelight for the SCAM associated with it

Local bank Overseas bank Payments

Letter of Undertaking (LOU)

Nirav Modi approaches

Not knowing clients credit

Having used the imported

 A detailed letter was written by him to PMO in July 2016 brings

in notice about the ongoing scam in PNB.

 He warned PMO that loan cannot be recovered and prompt

action is required in this matter.

 No actions were taken by PMO neither by CBI nor by ED.

 In return, he received a letter from PMO stating that the case

filed by him has been closed after enquiry.

Estimated Money lost per head

 Share prices of PNB Bank fell

 Share prices of Gitanjali

 On 1 March 2018, the government approved the Fugitive Economic Offenders Bill including Benami assets of

 In March 2018, the Reserve Bank of India scrapped banking instruments such as the Letter of

 On 19 Mar 2019, he got arrested in central London.

Stricter norms needed to be applied to defaulters.

Existing Loop holes were discovered in the current banking system

Human interference needed to be minimized

You might also like