ED seeks attachment of Nirav Modi’s assets worth Rs 255-cr in Hong Kong

ED seeks attachment of Nirav Modi’s assets worth Rs 255-cr in Hong Kong

Nirav ModiNew Delhi : The Enforcement Directorate (ED) on Thursday said it has sent request for attachment of fugitive diamantaire Nirav Modi’s Hong Kong assets worth Rs 255 crore in the multi-crore Punjab National Bank (PNB) loan default case.

The financial probe agency sought attachment of the assets by Hong Kong authorities under the Prevention of Money Laundering Act by sending a provisional attachment order in the form of Letters Rogatory. The ED said it has till date attached properties worth Rs 4,744 crore in connection with the case in India and abroad.

Earlier in October, the ED had attached assets in India and sought seizure abroad of properties worth Rs 218 crore belonging to Nirav Modi and his maternal uncle Mehul Choksi. The two had fled the country before the scam broke.

They are accused of defrauding state-run PNB of Rs 13,500 crore.

Nirav Modi and Choksi of Gitanjali Group are under probe by both the Central Bureau of Investigation and the ED. The ED had on May 24 and May 26 filed charge sheets against the two.

Non-bailable warrants have also been issued against them.

The Interpol had issued a Red Corner Notice (RCN) against Nirav Modi, his brother Neeshal and sister Purvi — both Belgian citizens — as well as Mihir Bhansali and Aditya Nanvati, close associates of Modi.

However, an RCN request against Choksi, who acquired Antiguan citizenship earlier in 2018, is pending with the Interpol.


Increased private participation needed in banking: Arvind Subramaniam

Increased private participation needed in banking: Arvind Subramaniam

Arvind Subramanian

Arvind Subramanian

Chennai : With the second largest Indian bank Punjab National Bank (PNB) hit by massive $1.8 billion fraud and other banks hit by frauds as well, Chief Economic Advisor to Indian government Arvind Subramaniam on Saturday advocated more private participation in public sector banks.

Inaugurating the Annual Convention of the Madras Management Association (MMA) under the theme ‘India 2018-Learning to Grow’ Subramaniam said two questions have to be dealt with viz: “if not now, when and if not this, whether to have the same status quo in the banking system?”.

He said the Reserve Bank of India (RBI) had recently passed a series of regulations following the scandals and scams that affected the functioning of the banks. Bank of Baroda closed down its South Africa operations and now recently, PNB is facing problems.

Subramaniam said that while the government was going for recapitalisation of public sector banks, the scrutiny, monitoring and disciplined deployment must be ensured only through greater private participation in banks.

According to him, there should be less public lending to private sector and the mode to achieve that is to have higher private participation in the banking sector.

He said recognition, resolution, recapitalization and reforms are the answers to the questions.

Subramaniam said recognition is identifying stressed assets to avoid non-performing assets and resolution means to go through the bankruptcy code.

As to reforms, he said more privatisation could be made since there was no guarantee that better governance recommendations of banks, instead of privatisation, would be implemented effectively.


PNB should reveal due diligence on Rs.1,700 cr loan to Nirav Modi: AIBEA

PNB should reveal due diligence on Rs.1,700 cr loan to Nirav Modi: AIBEA

Punjab National Bank (PNB)By Venkatachari Jagannathan,

Chennai : Only the naive would believe that just two officials were involved in the $1.8 billion fraud in Punjab National Bank (PNB) and that the whole bank was in the dark for the past seven years, said a top leader of a major bank union.

He also asked the PNB management to reveal what kind of due diligence was done on diamond trader Nirav Modi and his companies before extending a loan of Rs 1,700 crore.

“The PNB management is blaming other banks for not sharing details of their due diligence done on Modi’s business. The $1.8 billion fraud is done on non-fund based transaction. The PNB management has to clarify what kind of due diligence it had done while lending to Modi’s firms a sum of Rs 1,700 crore,” C.H.Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA) told IANS.

He also said the BJP government has not appointed workman and officer directors in public sector banks and that had weakened the checks and balances.

The PNB had said the alleged fraud was carried out by two staffers by not entering the transactions in the bank’s core banking solution but only in SWIFT signalling another bank’s overseas branch that the transaction is valid.

According to PNB’s complaint, some fraudulent issuance of Letters of Undertakings (LoU) were detected at its Brady House branch in Mumbai. The complaint said that the fraud came to light after the retirement of the deputy manager in the Brady House branch when employees of a set of partnership firms linked to diamond trader Nirav Modi presented import documents and asked for credit to pay their suppliers in January this year. The branch officials had asked for 110 per cent margin for issuance of LoU.

However the partnership firms argued that they had been availing such a facility in the past, but the branch officials did not find any official record in support of their argument.

It is clear, PNB stumbled upon the fraud by providence and not by its own intelligence, Venkatachalam said.

Simply put, LoU is a guarantee issued by a bank to another bank or its branch located in a foreign country. As per the LoU, the foreign bank or the foreign branch of an Indian bank would deposit the required sum in the Nostro account of the LoU issuing bank in that country. The importer then is paid the money.

When the borrower defaults, the foreign bank or the foreign branch of an Indian bank would claim its dues from the bank that issued the LoU.

According to PNB, the total fraud discovered linked to diamond trader Modi under the LoU was around $1.8 billion.

“There must be involvement of top officials of PNB to facilitate Modi’s fund needs. A high profile person like Modi would not directly deal with a low level officials at branch level,” Venkatachalam said.

A retired senior official of a government bank K.Srinivasan told IANS: LoUs are issued for a fee. Banks daily deploy their funds in various investment avenues including call money market. So, huge deposit in Nostro account would have been known to the PNB. Further the fee earned on such LoUs must have been booked,” Srinivasan said.

Srinivasan said, PNB management cannot simply say for seven years they were in the dark about the fraud.

Similarly, it is strange as to how the auditors — internal, statutory and concurrent — as well as the inspection team from RBI missed to check the deposits in Nostro accounts, the withdrawals from there and the fee income earned on LoUs, Srinivasan said.

Meanwhile, the Reserve Bank of India (RBI) some time back had asked the Indian banks to link core banking solution and the SWIFT network and also encrypt the messages sent using the SWIFT system, said a senior official in a core banking solution company.

“Some of the old version of core banking solution are not linked to the SWIFT system. As a result, bankers used to feed the fund transfer or other transactions in their core banking system and then send the necessary message to an overseas bank using the SWIFT console, the senior official in a banking software company told IANS preferring anonymity.

The SWIFT or the Society for Worldwide Interbank Financial Telecommunication is a network used by financial institutions to communicate financial transactions.

He said the PNB must have been using the old version of core banking solution without updating the same.

(Venkatachari Jagannathan can be reached at v.jagannathan@ians.in)