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The only foreign bank affected in Nirav Modi/Mehul Choksi fraud case turns out to be Intesa Sanpaolo SPA whose Hong Kong branch was called upon to provide money to Gitanjali Gems against a foreign letter of credit (FLC) issued by the Punjab National Bank (PNB).
The amount raised through the Hong Kong branch of the Italy-based bank by the Gitanjali group company headed by Mehul C. Choksi -- who left the country in January -- is $2,200,011.65 (Rs 140.8 million) against an FLC given by PNB, which is coming up for payment on March 19.
All other amounts, totalling to $754.92 million (Rs 48.86 billion) were raised by the Gitanjali group through foreign branches of Indian banks against FLCs or Letters of Undertaking (LoU) given by PNB. These details are available in the FIR filed by the Central Bureau of Investigation (CBI) against the Gitanjali group on February 15. The amount against Intesa Sanpaola is mentioned only against the SWIFT code of the branch without any name. SWIFT is the system of bank identification for wire transfers of money.
FIR against the rest of Rs 113 billion raised by Nirav Modi companies through fraud on PNB is yet to be filed, except for the first FIR which was filed by the CBI for an amount of Rs 2.80 billion on January 29.
CBI officials said details of the amounts (of around Rs 64 billion) would be added to the first FIR lodged against Diamond R Us, Solar Exports and Stellar diamond whose partners have been named as Nirav Modi, Nishal Modi (brother of Nirav), Mehul Choksi (uncle of Nirav) and Ami Nirav Modi (wife of Nirav)
The second FIR also names 11 directors of the three Gitanjali group companies.
The PNB fraud came to light on January 16, 2018, when officials of Nirav Modi companies approached the bank for buyers' credit without collateral saying they had been getting such facility for years. The bank said that the official who had earlier allowed such illegal facility through LoUs and FLCs had retired by then, and on checking by officials, the whole fraud unravelled.
According to PNB, a deputy manager and a single window operator (relatively lower-level officials) were responsible for issuing LoUs and FLCs worth hundreds of millions or dollars and these were not reported in the core banking solution system of the bank which tracks all transactions. The Nirav Modi and Mehul Choksi companies then used these documents to obtain buyer's credit from several banks.
Moreover, the LoUs were issued with validity for around a year when RBI directives stipulate only 90 days credit for exporters. Further, these LoUs and FLCs were regularly rolled over by the companies, which is again illegal under banking norms.
In a press conference in Delhi on Thursday, the Managing Director and Chief Executive Officer of PNB, Sunil Mehta, had said in response to a question that all the branches abroad which had issued money against LoUs or FLCs of his bank were branches of Indian banks except one. He had not named the foreign bank.
According to details mentioned in the FIR against three companies of the Gitanjali group, the amount raised by Gitanjali Gems Ltd was $335.06 mllion (Rs 21.44 billion) through LoUs and $89.86 (Rs 5.75 billion) through FLCs; by Gili India Ltd was $88.54 million (Rs 5.66 billion) through LoUs and $97.72 million (Rs 6.25 billion) through FLCs; and by Nakshatra Brands Ltd was $50.17 million (Rs 3.21 billion) through LoUs and $93.57 million (Rs 5.98 billion) through FLCs.
The Indian bank branches which had credited money to Nostro accounts of PNB on receiving LoUs or FLCs, which were then withdrawn by Gitanjali group companies as buyers' credit, include: State Bank of India (Mauritius); State Bank of India (Frankfurt); Bank of India (Antwerp); Canara Bank (Bahrain); Axis Bank (Hong Kong); Allahabad Bank (Hong Kong); Union Bank of India (Hong Kong); and Uco Bank (Hong Kong).
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