PNBs scam, linked to Nirav Modi’s companies may just have been tip of middle of iceberg. As agencies inquired on the modus operandi and the scope of scam, it now seems a figure of $2.27 billion tied to loans and corporate guarantees scam of Punjab National Bank may be staring at the entire banking industry.
In a report by Reuters, the agency reports that the Tax department estimates that as of March 2017, banks had extended loans and guarantees worth 176.32 billion rupees ($2.74 billion) to companies tied to billionaire jeweller Nirav Modi and his uncle Mehul Choksi.
— Reuters India (@ReutersIndia) February 17, 2018
The total impact of the scam is still being calculated and bill may well be much bigger than anything seen in past. While officially only four lowly officials of PNB have been charged in connection with the scam, it seems it was far more organised and widespread for just the named accused to pull it off. As the money was being constantly pumped on SWIFT channels, without a corresponding domestic account debit or even an intimation of guarantee in the banking system for over seven years the questions is how it went undetected for so long?
Then again the scam came to light only after the accused companies asked for more of the same guarantee from the bank and upon being rejected (without collateral) referred to similar transactions in past. Its almost sure that the entire process was so much institutionalized on both the ends (the bank and the accused companies) that those working on this scam didnt even realise that they were collaborators.
Suggesting further institutionalisation of scam, there seem to be nothing wrong as Nirav Modi and Chosi conducted themselves. IPO were being planned for Firestar Diamonds, owned by Nirav Modi and for another subsidiary of the Gitanjali were to debut this year. The promoters of both the companies were ready to face the rigorous process of SEBI for listing without any fear of being caught.