One of the largest banking scams that shattered all together the country’s economy is the Punjab National Bank Scam in 2018. The helmsman billionaire of this scam is one the visionary businessman Nirav Modi. He hailed from a family of businessmen and eventually, after studies joined his uncle’s business. Shifting in India, Mumbai, Nirav Modi & his father joined his uncle’s venture Gitanjali Retail Jewellery Company.
After that, he became the first jeweler from India to be featured in the honorable magazine covers Christie’s and Sotheby’s. In 2014, the ‘Nirav Modi’ jewelry brand was opened in New Delhi. Gradually, stores were opened in different countries like Hong Kong, New York, etc. which gained him huge revenue of $2 billion in sales.
Even though investigation is still going on, the main plot of the scam is the collusion between the bank and Nirav Modi relating to the LoUs. LoUs refer to Letter of Undertaking, which guarantees the repayment in case the borrower fails to repay the debt. It gives the borrower license or allows the borrower to take out loans from foreign banks through the LoUs of the original bank. These LoUs were misused to cash out loans from different foreign banks without any collateral or securities with it, or sanction limits. Allegedly, the corrupt officers of PNB did not link the SWIFT system to receive the financial statements with the CBS or Core Banking Solutions leading to disproportion in the financial statements. The money was spent for other purposes, and paying previous debt still and was unchecked for 7 years till the publish in January, 2018, when PNB complained their grievance was caused by the alleged scam. The total price gained in this scam was 11,400 crores ($1.8 billion). The share price of PNB dropped down immensely overnight and the business of retail jewelry suffered a lot.
Eventually, the government introduced many rules, which enforced the officials to compulsorily link the statements from SWIFT to CBS. Moreover, the use of LoUs for trade-related-credits were stopped immediately until any order of RBI. Therefore, PNB was liable to clear the balances that were to be repaid to various branches of banks overseas like UCO, Axis, Allahabad, and SBI.
After months of legal battles, on March 20, 2019, Nirav Modi was arrested in the UK and was booked in Wands worth prison. Various proceedings were conducted for the extradition of him in India, however, till now nothing could be done for his return in India. His solicitors plead about the mental stability of the man, which can be disrupted or booked in the jail of India.