ICICI Bank Managing Director and Chief Executive Officer Chanda Kochhar and her Axis Bank counterpart Shikha Sharma were on Tuesday summoned by the Serious Fraud Investigation Office (SFIO) in connection with the Rs 127-billion Punjab National Bank (PNB) fraud involving absconding diamantaire Nirav Modi and his uncle Mehul Choksi.
Meanwhile, the Central Bureau of Investigation (CBI) on Tuesday detained Gitanjali Group of Companies Vice-President Vipul Chitalia as part of its probe into the multi-billion fraud.
It is alleged that Choksi and Modi got Letters of Undertakings (LoUs) and Foreign Letters of Credit (FLCs) amounting to Rs 126.36 billion issued in favour of foreign branches of Indian banks based on fraudulent claims. To avoid scrutiny, the accused PNB officials did not enter the instructions for these LoUs in their internal software. They were sent through SWIFT, an international messaging system for banking which is used to pass instructions among banks globally to transfer funds.
An LoU is a guarantee given by an issuing bank to Indian banks having branches abroad to grant short-term credit to the applicant. In case of default, the bank issuing the LoU has to pay the liability to the credit-giving bank along with accruing interest.
Here are the top 10 developments in the massive PNB banking fraud involving Nirav Modi:
1) Nirav Modi's firm moves Delhi HC against seizure of his properties
Diamantaire Nirav Modi-owned Firestar Diamond International on Tuesday moved to the Delhi High court against the seizure of his properties by the Enforcement Directorate (ED) in connection with the Punjab National Bank (PNB) fraud case.
Firestar Diamond International has sought to quash of the order passed by the ED for the seizure of movable property.
It also challenged the provisions of the Prevention of Money Laundering Act (PMLA) that allow the ED to conduct search and seizure of property.
2) PMO apprised of action taken in PNB scam on Mar 1: FinMin
The finance ministry said it apprised the Prime Minister's Office (PMO) on March 1 of the action taken with regard to fraudulent issuances of Letters of Undertaking (LoUs) of Punjab National Bank leading to a fraud of Rs 12,646 crore.
In written replies to a host of questions regarding the alleged fraud by jewellery designer Nirav Modi and his uncle Mehul Choksi, the ministry informed the Rajya Sabha that the Central Bureau of Investigation (CBI) has registered two cases in the matter and so far has arrested 18 persons.
3) ICICI's Chanda Kochhar, Axis Bank's Shikha Sharma quizzed by SFIO: Heads and top officials of other banks have been hit by the massive Rs 127-billion fraud, too. The Serious Fraud Investigation Office (SFIO) summoned ICICI Bank chief Chanda Kochhar and Axis Bank's Shikha Sharma in the PNB bank fraud case involving Nirav Modi and his partner and uncle Mehul Choksi.
Sources in the agency said that Kochhar and Sharma would appear before the SFIO in Mumbai on Tuesday afternoon. They added that the two top bank officials were summoned for giving loan facility to Gitanjali Group and that they would be questioned.
Last year, ICICI Bank reportedly extended a loan of Rs 10 billion and Axis Bank Rs 7 billion to Gitanjali Gems.
According to another source, officials of India's largest lender, the State Bank of India, have been called for questioning.
SFIO seeks an explanation from banks: On Tuesday, the SFIO issued letters to select banks, asking them to explain the working capital facility given to Gitanjali Group.
According to sources, a consortium of 31 banks had given working capital facility to Gitanjali Group. Earlier, the agency had summoned Punjab National Bank, and now it has issued letters to some more banks.
The SFIO is said to have asked senior executives from the 31 banks who have done business dealings with the firms promoted by Modi and Choksi to be present at its office in the financial capital, according to sources.
News agency ANI reported that Axis Bank Deputy Managing Director V Srinivasan was seen leaving the SFIO office in Mumbai on Tuesday afternoon.
Deputy Managing Director Axis Bank V Srinivasan was seen leaving from SFIO office in Mumbai. pic.twitter.com/xlJcAi8lU4— ANI (@ANI) March 6, 2018
4) CBI detains Gitanjali Group's vice-president: The Central Bureau of Investigation (CBI) on Tuesday detained Gitanjali Group of Companies Vice-President Vipul Chitalia as a part of its probe into the multi-billion PNB fraud.
Chitalia was apprehended at the Mumbai airport and brought to the CBI office at the Bandra-Kurla Complex for questioning, officials told news agencies. However, they did not divulge any other details about Chitalia's alleged role in the PNB fraud.
5) Foreign lenders stop selling gold to PNB: The continuing fallout of the Rs 127-billion fraud has hit the state-owned lender in the eye of the storm again. As reported earlier, PNB's gold import business has taken a hit after the Nirav Modi episode. Sources have revealed that foreign lenders are unwilling to sell gold to the scam-tainted bank.
Foreign lenders that were selling gold to PNB are reportedly not willing to take risks. Concerns about weak compliance after it was struck by fraudulent letters of undertaking (LoUs) linger, said people in the know.
In recent months, PNB had emerged as one of the largest gold importing banks, where it earned a margin of 1-2 per cent.
6) CBI grills PNB general manager: On Monday, the CBI said that it had questioned a general manager of PNB's treasury division in connection with its ongoing probe into the Nirav Modi fraud case that has hit the state-owned lender hard.
"The agency officials Monday questioned S K Chand, who is a GM of the bank, in connection with the case," a CBI official said.
7) CBI gets remand of four accused: On Monday, CBI officials said that a court in Mumbai sent four accused, who had been arrested on Sunday, to the agency's custody till March 17. Two of the four arrested accused are from Nirav Modi's firm -- one is an auditor and the other an employee of the Gitanjali Group.
The CBI arrested Manish K Bosamiya, then AGM (Operation), and Miten Anil Pandya, then Finance Manager -- both of Firestarter International Ltd of Nirav Modi -- for their alleged role in the preparation of applications for the fraudulent LoUs submitted to PNB.
The third arrested person -- Sanjay Rambhia, a partner in CA firm Sampat and Mehta of Mumbai -- was an internal auditor of Nirav Modi's companies, while the fourth, Aniyath Shiv Raman Nair, was then director of Gili India Ltd.
CBI officials said that it was alleged that Nair, besides being one of the directors of the Gitanjali Group, was also the authorised signatory for the applications made to PNB for issuance of purported LoUs and letters of credit.
The CBI has to date arrested 18 persons in the case so far.
In the special CBI court, the central probe agency explained the modus operandi involved in the alleged Rs 126.3-billion PNB fraud. An LoU would be issued to one of Modi and Choksi's firms, and after the money was credited to the applicants' account, a new LoU would be obtained to "adjust" the earlier one, the CBI lawyer said.
This process, according to the lawyer, had been going on since 2010.
9) Woman moves HC against arrest after sunset: On Monday, an employee of Nirav Modi's firm moved the Bombay High Court contending that the CBI arrested her in the multi-billion PNB scam in violation of the law.
In her petition, Kavita Mankikar has claimed that she was arrested on February 20 at 8 pm by CBI officials, contrary to the provision of law that says a woman cannot be arrested after sunset.
10) Rahul leads Cong MPs' protest in Parliament complex: On Tuesday, Congress President Rahul Gandhi led his party's MPs in staging a protest near Mahatma Gandhi's statue at the Parliament complex over the PNB fraud. Gandhi and the protesting MPs demanded answers from the Prime Minister on the issue.
Further, the Congress staged protests in the Lok Sabha and the Rajya Sabha, disrupting proceedings in both Houses. Party leaders had also given adjournment motions to discuss the banking scams.
The Opposition party is demanding that Prime Minister Narendra Modi make a statement in both the Houses on how the banking scams happened under his charge. They demanded that Modi "break his silence" and come clean on "bank loot involving designer jeweller Nirav Modi".
The Congress MPs raised slogans like "Desh ka chowkidaarkahangaya? So gaya, so gaya (Where is the country's watchman? He is asleep)", in a swipe at the prime minister, who had claimed that he is the country's watchman and will not allow corruption.
With agency inputs