PNB fraud: Nirav Modi blames bank's 'haste' for fiasco; top 10 developments

Nirav Modi knows who's to blame for the losses faced by public-sector lenders due to the Rs 114-billion scam at Punjab National Bank (PNB). According to the absconding businessman, it's PNB and its "haste" that are to blame. Modi reportedly wrote to banks, saying that the firms controlled by him were unable to clear their dues because of the actions taken in "haste" by PNB. He also asked the banks to pay salaries to the 2,200 employees working in those firms. Modi also said the dues were much less than what the bank had claimed, and that his relatives booked in the cases filed by the central agencies had nothing to do with the operations of the firms under their scanner. At the same time, the Centre has shot written to the Reserve Bank of India (RBI), asking whether at any stage it detected the fraud, involving letters of undertaking (LoUs) issued on behalf of companies promoted by Nirav Modi and his uncle Mehul Choksi. Here are what Modi wrote in his letter and the top developments in the largest banking scam in the country's history: 1) PNB's 'haste' to blame: Nirav Modi, the alleged kingpin of the largest banking scam in the country's history, has said PNB's overzealous approach shut the doors on his ability to clear the dues. "In the anxiety to recover your dues immediately, despite my offer, your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts," Modi said in his letter to banks. 2) Raids shut down Nirav Modi companies: He said the operations of his companies Firestar International Private Ltd (FIPL) and Firestar Diamond International Private Ltd (FDIPL) had effectively ceased owing to raids launched by investigative agencies, including the Enforcement Directorate and the Central Bureau of Investigation. ALSO READ: Nirav Modi PNB fraud: How bank auditors failed to detect scam in 6 years 3) Modi claims his companies owe only Rs 50 billion: Modi also said the dues were much less than what the bank has claimed, and that his relatives booked in the cases filed by the central agencies had nothing to do with the operations of the firms under their scanner. In a letter Modi written on February 15-16 to the Punjab National Bank management, a copy of which was accessed by news agency PTI, Modi pegged the money his companies owed to the bank at under Rs 50 billion (Rs 5,000 crore). PNB, the second-largest state-run bank, had, on February 14, informed the exchanges about detecting a $1.77-billion fraud at its Brady House branch in Mumbai, and named the firms led by Modi and his uncle Choksi's Gitanjali Group, and some other diamond and jewellery merchants, as suspects. Central government agencies, the CBI and the Enforcement Directorate, have registered cases on the complaint by the bank, and launched nationwide searches on dozens of offices and residences of the alleged fraudsters. The bank has named Modi's brother, his American wife Ami, and uncle Choksi, besides some others, in the FIR. ALSO READ: Rs 114-bn PNB scam: Mehul Choksi, the uncle who mentored Nirav Modi On the over Rs 110-billion (Rs 11,000-crore) loss claimed by PNB in its FIR, Modi said, "As you are aware, this is entirely incorrect and the liability of the Nirav Modi Group is substantially less...." "The erroneously cited liability resulted in a media frenzy which led to immediate search-and-seizure operations, and which in turn resulted in Firestar International and Firestar Diamond International effectively ceasing to be going concerns," his letter said. 4) Modi wants banks to pay his employees' salaries: Nirav Modi has asked the banks to pay salaries to the 2,200 employees working in those firms. "I would request you to permit salaries for FIPL and FDIPL to be paid for the 2,200 employees from the balance lying in the current accounts.

Our HR head will send you a breakup of the monthly salary," Modi, who left the country along with his family in the first week of January, before the alleged scam became public, wrote in the letter. 5) Modi wants to sell his firms: Nirav Modi requested banks to allow him to sell the Firestar group. "Even after your complaint was filed, in good faith I wrote to you saying please sell/allow me to sell Firestar Group, or their valuable assets, and recover the dues not just from Firestar Group, but also from the three firms," Modi's letter said. He said the inventory, including assets and receivables of FIPL and FDIPL and three other firms could have settled the pending dues to the banks. "However, now that stage appears to have passed, and there is a general panic," he said, adding that the valuation of the firms stood at Rs 65 billion. ALSO READ: Revealed: Nirav Modi's Taiwan, Surat, Hong Kong & Dubai connections 6) There has been no default: He went on to state that PNB had time and again acknowledged that the buyer's credit facility had been extended by it to the three partnership firms for several years, and that there had been no default on the part of any of these firms over all these years. He said that money went through PNB all these years for the repayments of the advances given by the overseas bank branches under the buyer's credit. "That Firestar International and Firestar Diamond International have never been in default to any bank, and the bankers are fully secured". He also said that PNB had over the years been earning bank charges to the tune of billions of rupees on the buyer's credit facility extended by the bank to the three partnership firms. He added that PNB had extended the money to the firm's buyers as well, from where also it has been receiving full payments, with interest and on time, all these years. 7) Govt seeks RBI's view on lapses in banking system: The Union government has shot off a letter to the RBI on the alleged Rs 114-billion PNB scam, asking whether at any stage the banking regulator had detected the fraud, involving LoUs issued to foreign branches of Indian banks on behalf of Nirav Modi and Choksi companies. "Under the Banking Regulation Act, the RBI has a major role related to inspection, regulation, audit and the oversight of banks. We have written to the RBI, asking how the alleged scam, which had been going on for years, went undetected, and whether the regulator exercised its role under the law," an official said on condition of anonymity. ALSO READ: Nirav Modi diverted Rs 12.16-bn SEZ diamonds to domestic market: I-T Dept 8) Three more PNB officials arrested: The CBI on Monday arrested three more PNB officials after intense grilling during the day in connection with the scam involving billionaire jewellery merchants Nirav Modi and Mehul Choksi, officials said. The agency also started searches late Monday evening at group offices of Nirav Modi at Peninsula Business Park in lower Parel, Mumbai. The total number of arrests by the CBI has risen to five -- four PNB officials and a retired employee of the bank -- after Monday's development. Manoj Kharat, a single-window operator at PNB, and the retired employee Gokulnath Shetty were arrested earlier. Bechhu Tiwari, the then chief manager in the forex department; Yashwant Joshi, Scale-II manager in the forex department; and Praful Sawant, Scale-I officer handling the exports section were arrested by the agency Monday evening, officials said. The agency had started searches at their residences located in Navi Mumbai, Andheri and Dombivilli, they said. ALSO READ: Before PNB fraud: Nirav Modi, Choksi left 18 businessmen, 24 firms bankrupt 9) 'PNB solely liable for fraud': The public sector banks (PSBs) affected by fraudulent LoUs issued by PNB have told the government that PNB is wholly responsible for the alleged Rs 114-billion scam related to the groups of companies led by Nirav Modi and Mehul Choksi. A senior banker disputed the claim made by PNB that the fraud went undetected because the bank's core banking system (CBS) was not integrated with the Society for Worldwide Inter-Bank Financial Telecommunication (SWIFT), a global financial messaging system that was used to instruct foreign branches of Indian banks to release money, amounting to Rs 114 billion over the years, for companies owned by Nirav Modi and Mehul Choksi. The executive also said all the LoUs issued by PNB were genuine and in accordance with norms set out by the RBI. "Once our foreign branches transferred the money to the PNB's nostro account how can it claim that the transaction was not recorded in its books? It should reflect in its accounts," the banker said on condition of anonymity. 10) CVC demands an explanation: The Central Vigilance Commission (CVC) on Monday asked the PNB and Ministry of Finance officials to submit a report on how the scam took place, despite monetary regulations being in place. CVC has given the bank 10 days to prepare and submit the report. Earlier, officials from PNB, RBI, and Department of Financial Services gave a two-hour long presentation to CVC about the case. The law enforcement agency has asked for names of officials who were involved in the scam and sought identification of officials who could have taken action and prevented it.