Rs 114-bn fraud: Submit concrete plan to pay dues, PNB tells Nirav Modi

Lender responds days after accused billionaire wrote to banks

Punjab National Bank on Thursday told Nirav Modi, one of the prime accused in the Rs 114 billion letters of undertaking (LoUs) fraud, to submit “a concrete and implementable plan” to clear his liabilities.

Responding to a recent e-mail from the billionaire diamond jeweller, the scam-hit bank said companies owned by Modi had obtained LoUs illegally and in violation of the Foreign Exchange Management Act (FEMA), prompting it to go public about the fraud.

PNB has termed the whole loan-taking exercise by the accused firms as “money laundering”. LoUs, the bank said, were not backed by collateral, and these companies did not submit any timeline for import of goods (in this case, pearls). 

“You were getting LoUs issued illegally and in an unauthorised way through a few bank officials. At no stage were such facilities extended by our bank to the three partner firms. When these illegal activities surfaced, they pointed to an apparent violation of FEMA and the money laundering law,” PNB’s general manager (international banking division), Ashwini Vats, said in an e-mail response.

Modi, in his letter to lenders on Monday, had attributed his inability to pay the dues to PNB’s “haste” in going public about the matter. “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 had said.

PNB said the bank was “compelled to bring these activities to the notice of the law and enforcement agencies, which the bank did”. The bank added that “the commitment and undertaking for sparing of the total liability was not backed by providing upfront amounts and timelines”.

At the time of issuing LoUs, banks ask for collateral. In this case, the scam was detected when a PNB executive at the Brady House branch in Mumbai asked for 100 per cent cash margin for LoUs from the group of companies controlled by Nirav Modi and the firm declined to pay in January, saying they had been availing of this facility for years without any cash margin.

PNB had responded to the Modi’s letter after seeking legal opinion, sources said.

The state-owned bank said in a regulatory filing on Thursday it had followed lawful avenues to recover its dues.

PNB Managing Director and Chief Executive Officer Sunil Mehta said last week that Modi, in his email exchanges, had come up with “vague offers” to repay the amounts due and had not submitted a concrete plan.