Almost 100 days after India’s biggest bank fraud case, here’s what we know so far

Still recovering.
Still recovering.
Image: AP Photo/Rafiq Maqbool
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On Feb. 14, Punjab National Bank (PNB), India’s second-largest government-owned lender, sent shock waves around the country when it declared that it had been defrauded of nearly $2 billion (over Rs13,000 crore).

Diamantaire Nirav Modi and his uncle Mehul Choksi had allegedly siphoned money for over seven years through illegal bank guarantees from a single branch in Mumbai, with the help of a few bank employees.

Following the disclosure, the country’s top investigative agencies, the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED), stepped in. Several bank employees, including its former CEO and executive directors, have been charged with alleged involvement in the fraud.

Almost a 100 days after the scam broke, here is what we know about India’s biggest ever loan fraud.

Where are Modi and Choksi?

The CBI first filed a case against the duo on Jan. 31, but both had already been on the run by then.

Modi was first said to be in Switzerland and then in the US. Now, he is believed to be in London travelling on a Singaporean passport, according to an India Today report. He is also reportedly exploring ways to get political asylum in the UK.

The ED, meanwhile, has attached Modi’s properties worth Rs171 crore.

Choksi, too, has refused to return to India, citing health issues, the fear of a media trial, and safety concerns.

How is PNB recovering?

Not too well.

The scam has dealt a body blow to the lender. It reported a net loss of Rs13,417 crore between January and March 2018. That’s the highest-ever quarterly loss by any Indian bank. Its gross non-performing assets (NPAs) also soared to Rs86,620.05 crore, or 18.38% of its total advances.

After its poor performance, credit rating agency Moody’s Investor Services downgraded the bank to “junk,” suggesting it is not worth investing in.

In the last couple of months, PNB has made several efforts to salvage its reputation, but investors remain unimpressed. The stock, trading at Rs78.20 as of May 21 on BSE, has lost half its value since Feb. 14.

What are the findings so far?

Last week, the CBI filed two different charge sheets accusing Modi and Choksi, and some of their employees, of hatching a criminal conspiracy against the bank.

Former managing director and CEO, Usha Ananthasubramanian, and two executive directors (EDs), have also been named by the CBI. Soon after the case was filed, the two EDs were expelled, while Ananthasubramanian, the current CEO of Allahabad Bank, has been stripped of her executive powers.

The CBI has held these officials responsible for criminal breach of trust, allowing Modi and Choksi to game the system and manipulate the Society for Worldwide Interbank Financial Telecommunications (SWIFT), a messaging system used globally for cross-border fund transfers between banks.

During Ananthasubramanian’s tenure at PNB between 2015 and 2017, the Reserve Bank of India (RBI) had raised red flags about the leaks in the SWIFT system. These were allegedly ignored by the management.

“…the fraud was allegedly perpetrated despite the knowledge of senior officials of PNB, who did not implement the circulars and caution notices issued by the Reserve Bank of India regarding safeguarding the SWIFT operations and instead, misrepresented the factual situation to RBI,” the CBI said in a release on May 16.

The probe agency has reportedly claimed that Ananthasubramanian was well aware of the fraud and that she’d even met senior executives from Modi’s firms regularly, including the CFO of Firestar International.

Another internal probe at PNB has resulted in the suspension of over 20 employees so far.