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    PNB Scam

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    Prachi Chheda
    The document summarizes a Rs. 11400 crore fraud committed by Nirav Modi through fraudulent Letters of Undertaking (LOUs) issued by Punjab National Bank (PNB). Nirav Modi, owner of several diamond companies, used fake LOUs without collateral to secure credit from other banks. The fraud went undetected for years until a new PNB employee asked for collateral in 2018, triggering the investigation. Several PNB employees and auditors were complicit or negligent in failing to detect the fraud earlier. The scam significantly impacted PNB's finances and reputation as well as other victim banks. Going forward, corrective actions include discontinuing LOUs, integrating SWIFT, and

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    PNB Scam

    Uploaded by

    Prachi Chheda
    248 views13 pages
    The document summarizes a Rs. 11400 crore fraud committed by Nirav Modi through fraudulent Letters of Undertaking (LOUs) issued by Punjab National Bank (PNB). Nirav Modi, owner of several diamond companies, used fake LOUs without collateral to secure credit from other banks. The fraud went undetected for years until a new PNB employee asked for collateral in 2018, triggering the investigation. Several PNB employees and auditors were complicit or negligent in failing to detect the fraud earlier. The scam significantly impacted PNB's finances and reputation as well as other victim banks. Going forward, corrective actions include discontinuing LOUs, integrating SWIFT, and

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    Ppt on pnb scam by nirav Modi.(for educational purposes only)

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    The document summarizes a Rs. 11400 crore fraud committed by Nirav Modi through fraudulent Letters of Undertaking (LOUs) issued by Punjab National Bank (PNB). Nirav Modi, owner of several diamond companies, used fake LOUs without collateral to secure credit from other banks. The fraud went undetected for years until a new PNB employee asked for collateral in 2018, triggering the investigation. Several PNB employees and auditors were complicit or negligent in failing to detect the fraud earlier. The scam significantly impacted PNB's finances and reputation as well as other victim banks. Going forward, corrective actions include discontinuing LOUs, integrating SWIFT, and

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    248 views13 pages

    PNB Scam

    Uploaded by

    Prachi Chheda
    The document summarizes a Rs. 11400 crore fraud committed by Nirav Modi through fraudulent Letters of Undertaking (LOUs) issued by Punjab National Bank (PNB). Nirav Modi, owner of several diamond companies, used fake LOUs without collateral to secure credit from other banks. The fraud went undetected for years until a new PNB employee asked for collateral in 2018, triggering the investigation. Several PNB employees and auditors were complicit or negligent in failing to detect the fraud earlier. The scam significantly impacted PNB's finances and reputation as well as other victim banks. Going forward, corrective actions include discontinuing LOUs, integrating SWIFT, and

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    You are on page 1of 13

    24th July, 2019

    PNB scam by Nirav Modi


    ANKITA, ANTIMA, PRACHI, MRINAL &RIYA
    “Shining Diamond trader took away PNB’s
    shine”
    Companies owned by Nirav Modi
    Diamond R.S.
    Gitanjali
    Stellar Diamond
    Group
    Solar Exports
    Terminologies
    1 2
    LOU
    3

    5
    WHAT IS THE FRAUD ABOUT?
    •Amount involved Rs.11400 crore.

    •Began in 2011 with approaching PNB for issuing LOUs for import.

    •Fake LOUs were issued without any collateral.

    •Instructions through SWIFT to Axis Bank & Allahabad Bank,


    Hongkong to provide Buyers’ Credit.
    HOW WAS THE FRAUD UNCOVERED?
    One of the colluding employees of PNB retired in Jan 2018.

    Representatives of Nirav Modi approached PNB for a fresh guarantee.

    The new PNB employee in that position asked for a collateral security.

    The employee was informed that collateral was never demanded in the past.

    This triggered investigation.

    Investigation revealed hundreds of guarantees fraudulently granted to Nirav Modi.


    WHY THE SCAM COULD NOT BE DETECTED EARLIER?
    Non -
    Integration
    of SWIFT
    with CBS

    Why the
    Scam could Manage-
    The Failure
    not be ment
    of Auditors
    detected Failure
    earlier?

    Non –
    Rotation of
    Employees
    PERSONS INVOLVED IN THE SCAM
    • Nirav Modi – Owner of Nirav Modi firm, Diamond RU.S, Stellar Diamond and Solar Exports and the prime accused in the scam.
    • Mehul Choksi – Owner of Gitanjali Group and Nirav Modi’s uncle.

    • PNB Employees – Gokul Nath Shetty (Retired Dty Manager), Manoj Kharat (Clerk), Hemant Bhat (Clerk and Authorized
    Signatory), Becchu Tiwari (Forex Dept Chief Manager)
    • MK Sharma – Internal Auditor and Chief Manager of PNB
    • Vipul Ambani – CFO of Nirav Modi Company.
    • Kavita Mankikar – Executive Assistant
    • Arjun Patil – Senior Executive of Fire Star Group
    • Kapil Khandelwal – CFO of Natshaktra and Gitanjali group
    • Niten Shahi – Manager of Gitanjali Group
    • Rajesh Jindal – General Manager of PNB. He was the head of Brady Branch between 2009-2011.
    • Bishnubrata Mishra – Former internal auditor of PNB. He was responsible for auditing the transactions between 2011-15.
    • Miten Anil Pandaya – Financial Manager of Firestar International Ltd.
    ROLE OF AUDITOR
    •MK Sharma, the senior internal auditor of PNB Brady Branch was responsible for
    auditing the system of Brady branch and to report any fraud to the zonal office.
    •The auditors had the knowledge of the fraud yet they didn’t file any complaint.
    •According to one report, bank didn’t have enough independent members on the auditing
    board during 2015-17.
    •According to ICAI, it is mandatory for every auditor to verify and scrutinize every
    transaction which takes place through SWIFT. But in this case, the auditor did not
    deliberately verify the same.
    •The internal auditor, concurrent auditor and statutory auditor of the bank should have
    checked the transactions done through SWIFT but the transactions were deliberately
    ignored.
    • The audit committee did not examine the quarterly report of foreign exchange dealing.
    EFFECT OF THE SCAM ON PNB AND
    OTHER BANKS
    Moody and Fitch places PNB under review for downgrade. Credit Ratings were
    affected.
    The stock price of PNB fell from Rs. 160 to Rs. 95.5
    The NIFTY Bank fell down 25,810.25 to 24,477.65
    PNB was asked to pay all debts to other banks.
    The share price of Gitanjali Gems fell down from Rs. 64.2 to Rs. 15.8
    PNB had suffered massive loss ( Rs. 4,500 crores approx.)
    Other banks affected include : Allahabad Bank, UCO Bank, Axis Bank, SBI, Union Bank.
    Impact on Imports and Exports.
    WHAT COMES NEXT?
    Government and RBI under pressure to take corrective actions.

    Total Discontinuation of LOU’s.

    Integration with SWIFT.

    Strict guidelines on Rotation of employees.

    Strict Regulatory controls.

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