Nirav Modi and Mehul Choksi's overseas businesses and assets across more than a dozen countries are under the scanner of the Enforcement Directorate (ED), which will soon send judicial requests to countries like Belgium, Hong Kong, Switzerland, the United States, the United Kingdom, Dubai, Singapore, and South Africa for obtaining information about them as part of the widening of its probe into the Rs 114-billion Punjab National Bank (PNB) fraud case.
Nirav Modi, his wife Ami, and uncle Mehul Choksi have been summoned by the ED to appear at its zonal office in Mumbai on Monday. According to sources, if they skip the summons, the agency could approach a special PMLA court to get non-bailable warrants issued against them.
Modi has already had his luxury cars, including a Rolls Royce Ghost, a Mercedes Benz, and a Porsche Panamera, and imported watches, seized in the past week. During the weekend, the Income-Tax department seized over 150 paintings by renowned artists from Nirav Modi's warehouse located at Wadala in Mumbai.
While probe agencies continue to put pressure on Modi and Choksi, the Institute of Chartered Accountants of India (ICAI) assured of an "accelerated inquiry" into auditors' role in the PNB fraud.
Meanwhile, on Sunday, the Central Bureau of Investigation (CBI) examined PNB's Executive Director K V Brahmaji Rao for a second day in connection with the PNB scam.
Here are the top 10 developments in the massive banking scam involving one of India's richest men, Nirav Modi:
1) PNB scam goes international as ED expands probe to 17 countries: Soon, the ED will be sending judicial requests to over a dozen countries for obtaining information about Modi and Choksi's overseas businesses and assets. According to official sources, the probe agency will approach a Mumbai court with the request to obtain Letters Rogatories (LRs) to be sent to 15-17 countries. The agency has traced the footsteps of the firms owned by Modi, his uncle Choksi and others associated with them to these countries.
These LRs would be sent to Belgium, Hong Kong, Switzerland, the United States, the United Kingdom, Dubai, Singapore, and South Africa, among others. Further, official requests on the basis of agency-to-agency exchange will also be sent.
With this exercise, the ED aims to obtain the details of Modi and Choksi's overseas financial holdings, their bank accounts, assets, partnerships, showrooms, trusts, and other assets. According to sources, the agency will investigate these assets and their sources of income. Subsequently, if needed, they will be attached under the criminal sections of the Prevention of Money Laundering Act (PMLA).
2) Non-bailable warrants could be issued against Modi & co: The ED has summoned Modi, his wife Ami, and Choksi to appear at its zonal office in Mumbai on Monday.
According to sources, the agency could approach a special PMLA (Prevention of Money Laundering Act) court to get non-bailable warrants against them if they skip the summons.
3) After PNB, lenders look to raise insurance cover: Worried over the spate of frauds that have hit the banking sector, banks are looking to increase their insurance cover against delinquencies by their employees. "Frauds of such magnitude and scale -- PNB fraud Rs 114 billion (Rs 11,400 crore) and OBC fraud Rs 3.9 billion (Rs 390 crore) — has forced us to consider substantially much higher risk cover than the basic banker's indemnity policy which various banks have right now," a top public sector bank official said.
For example, PNB had only bought a basic banker's indemnity policy, which covers employee fraud, to the extent of Rs 20 million (Rs 2 crore). This amount would not cover even 0.2 per cent of Rs 114-billion fraud allegedly committed by Modi, Choksi and their associates in collusion with officials of a Mumbai branch of the bank.
4) Govt revisiting plans for a bank holding company: With the PNB scam's fall-out leading to criticism from the Opposition, the government is revisiting its plans of a bank-holding company. Such a company would hold all of the Centre's shares in public sector banks and would raise capital for them.
Such a holding company was first proposed by Finance Minister Arun Jaitley in the 2015-16 Union Budget.
5) Foreign lenders review counter-party limits on PNB: After ratings agencies Moody's and Fitch placed their earlier assessment of the state-owned lender under watch for a possible downgrade, foreign lenders have started to review bilateral sanction limits with PNB.
PNB, for its part, held a meeting with foreign banks on Friday. The scam-hit bank assured them that it was robust enough to meet any legitimate claims from other banks for the issued letter of undertaking (LoUs). Further, it said that it had taken steps to improve its risk management systems.
This development follows the Rs 114-billion fraud revelation at PNB, involving some of its own employees fraudulently issuing LoUs, a trade finance instrument, for entities controlled by Nirav Modi.
6) CBI questions PNB's executive director for a second day: On Sunday, the CBI examined PNB's Executive Director K V Brahmaji Rao for the second day in connection with the Rs 114-billion scam that has hit the lender.
Rao, who started his career in banking 35 years ago as a probationary officer in Vijaya Bank, handled the Mumbai zone, among others, in the bank where the crime was allegedly detected, officials said. They added that several other officers of the bank were being questioned by the agency as well.
According to the officials, the examination was focused on understanding how the crime was detected by the bank and other procedural issues and their violations. They were not being treated as accused, the officials added.
7) CII for hi-tech control systems, privatising PSBs: In the wake of the PNB scam, the Indian industry on Sunday urged for better and hi-tech control systems to check financial frauds. It also sought a gradual decrease in government holding in public sector banks (PSBs).
The government should strategically divest its stake in PSBs to 33 per cent in a phased manner and also adopt a twin strategy for tackling financial frauds, including better monitoring and supervision of banks and adoption of best corporate governance standards, the Confederation of Indian Industry (CII) said in a release here.
"The government, regulators, and industry must act fast to address systemic risks in the financial sector," CII President Shobana Kamineni said in a statement. "The three key solutions for the banking sector are better management and operational efficiencies, use of technology such as blockchain and big data analytics, and lowering government shareholding in public sector banks," she said.
8) 'Nirav Modi deposited Rs 900 mn in PNB hours before note ban': Hours before the announcement of demonetisation, Nirav Modi deposited cash worth Rs 900 million at one of PNB's branches, Nationalist Congress Party (NCP) MP Majeed Memon has alleged while quoting a report.
"When Nirav Modi left India, at that time it was reported that some hours prior to Prime Minister's announcement of demonetisation in 2016, Nirav Modi deposited Rs 900 million of cash in one branch of PNB, and he probably exchanged it for bullion or something," Memon told news agencies, adding, "I think that there should be proper investigation to see if there is any element of truth to it."
9) Assocham bats for business lending: In the wake of the PNB fraud, Assocham on Sunday urged that business lending should not be allowed to halt.
The chamber argued that any pause in business lending would be demoralising and that it would set in among the top functionaries and employees of the state-owned banks, something the country can ill-afford at a time when credit growth was about to recover and the economy was set to grow at a higher pace.
10) Surat traders hope their business won't be hit: Surat's diamond industry is hopeful that its business will not be affected adversely if banks tighten lending norms in the wake of the PNB fraud.
The demand for bank credit from small and medium enterprises involved in cutting and polishing diamonds is likely to go up despite the fraud, industry representatives said.
With agency inputs