Before starting You need to know that who is Nirav Modi? Nirav Modi is a Dimond Merchant and Business. According to Forbes Nirav Modi was 57th Billionaire of India in 2017. Now Let's discuss How Nirav Modi did fraud to PNB of nearly Rs.11000 Crore. First Let me explain you some Banking term in Short which is related to this Case.
LoU - Letter of Undertaking. It means It is a guarantee that a bank is obliged to repay the loan if the actual borrower.
SWIFT - Society of Worldwide Interbank Financial Telecommunication, or SWIFT, is a system to send instant messages. Once a foreign bank or a foreign branch of a bank gets the LoU via the SWIFT message, it disburses the loan to the borrower.
Offsetting the Payment - When the borrower did not repay the first Rs800 crore, the bank ought to have stepped in and booked a default by the group company. Instead, the two PNB employees, who were allegedly party to the fraud, issued more LoUs on behalf of PNB, asking other banks to give out fresh loans to the firms.
The fraud started on 2011 to 2017 and on the 3rd week of January. The Auditor/New Cheif of PNB detect the fraud by doing deep research. On Wednesday, PNB said in a regulatory filing it had discovered fraudulent and unauthorized transactions worth Rs11,000 crore at the Mumbai branch of PNB Bank.
It started detecting on 16th January when Accused requested buyers’ credit to pay overseas suppliers (Nirav Modi bought Diamonds and jewelry from the foreign market. For the Low-interest rate he ask PNB to Give some LoU to foreign Bank.) Now branch official asked the companies to put down the full amount as collateral so the bank could issue LoUs to authorize the credit.
When the firms argued that they had used such facilities in the past without keeping any money on margin, PNB scanned through records and found no trace of any transactions, according to the bank’s account and it triggers the signal of Red Flag for the PNB. Prior to this two junior employees had issued LoU on the SWIFT interbank messaging system without entering the transactions on the bank’s own system.
After doing the deep research PNB Officials found that earlier without any confirmation and SWIFT few PNB officials have provided multiple LoU's and even PNB officials have deep roots and involves in this Scam. Now this Case was handed over to CBI and they are investigating deeply.
Now the question of security has triggered on general Public because this is becoming usual in India after many scams like Malya, Lalit Modi, and Nirav Modi. On the other side, Government is trying to curb the corruption by Linking Eaadhar Card with Bank and other ID Proofs and on the other side, this type of scams triggered the Insecurity in the Mind of General Public because here Niram Modi has Looted our Money, Money of Tax Payers. Ultimately We have to suffer this Loss not any single Person.
What is next?
These events are repeatedly telling us that government needs to wake up (Even Nirav Modi knew about his future and escape from India before Indian Intelligence catch him). The banking sector has to wake up and need some advancement in recruiting process.
What are your thoughts on this scam? Kindly Give your suggestions.