PNB junks Nirav Modi claims, asks him to pay up

The fraud-hit Punjab National Bank (PNB), on Thursday, asked the runaway diamantaire Nirav Modi to come up with a concrete and implementable plan to settle the loss caused to it by fraudulent issuance of Letters of Undertaking (LoU) through its branch in Mumbai.

The bank said it has followed "the lawful avenues available to it as per law" to recover its dues. The public sector bank was responding to Modi's claims that PNB closed all options to recover dues from him by going public.
The bank further said it had adequate capital to meet any liabilities that arise from the fraud.

PNB had, last week, reported a Rs 11,400 crore scam involving Nirav Modi, Mehul Choksi and the bank employees at the Brady House branch in Mumbai. DNA had reported quoting government officials that the fraud is likely to grow much bigger and cross Rs 20,000 crore.

"You were getting LoUs issued illegally and in an unauthorised way through few bank officials. At no stage such facilities were extended by our bank to your three partner firms," PTI quoted sources citing mail response sent by PNB General Manager (international banking division) Ashwini Vats to Modi.

When Modi's illegal activities surfaced, the bank brought them to the notice of the law enforcement agencies as they apparently violated FEMA and anti-money laundering laws.

"Your commitment and undertaking for sparing of the total liability was not backed by providing upfront amounts and timelines. However, should you have any concrete and implementable plan, do revert," PTI quoted the mail.

A day after the fraud was made public, the celebrity jeweller wrote to the bank management, saying that the bank's over-zealousness had shut the doors on his ability to clear the dues. In the letter, he pegged the money owed to the bank at Rs 5,000 crore.

The PNB on Thursday issued a clarification to the stock exchanges, assuring that the bank had enough assets and capital to meet any liability that would be decided as per the law. Investors and customers of the bank have been concerned about the magnitude of the fraud and its impact on its operations.

On failing to report the matter to stock exchanges when it occurred, the bank said that "any news in public would have alerted the fraudster, affecting recovery since law enforcement agencies were assigned to investigate the matter."

"On basis of the preliminary investigation report, the bank informed the board as well as BSE and NSE," it said in the regulatory filing.

The bank informed the Exchanges four days after the Central Bureau of Investigation (CBI) filed an FIR about the fraud. The bank had lodged a complaint with the agency a day before that.

The stock exchanges also asked for a clarification how the fraud amount increased from Rs 280 crore to Rs 11,000 crore in its sequential filings.

"On receiving further investigation report, the fraud amount had touched Rs 11,394 crore. Subsequently, an FIR was filed on 13 February and RBI was informed simultaneously. BSE and NSE were informed the next day," the bank said.