The Punjab National Bank (PNB) scam, one of India’s most significant financial frauds, involved prominent jewellers Mehul Choksi and his nephew Nirav Modi. This fraudulent scheme, which came to light in 2018, saw the duo allegedly siphoning off approximately ₹13,000 crore (around $1.8 billion) from PNB through deceitful means.
The modus operandi centered around the misuse of Letters of Undertaking (LoUs), which are guarantees issued by banks to facilitate overseas transactions. Choksi and Modi, in collusion with certain PNB officials, reportedly obtained these LoUs without adhering to the requisite procedures, thereby bypassing the bank’s core banking system. This allowed them to secure substantial loans from foreign branches of Indian banks without proper collateral.
The funds acquired through these fraudulent LoUs were allegedly funneled into various ventures, including luxury real estate, high-end jewelry, and other personal assets. Both Choksi and Modi fled India in early 2018, just before the scam was exposed. Choksi initially took refuge in Antigua and Barbuda, while Modi was later located and arrested in the United Kingdom.
In a significant development, Mehul Choksi was recently arrested in Antwerp, Belgium, following an extradition request by Indian authorities. His arrest marks a pivotal moment in the ongoing efforts to bring the perpetrators to justice. Choksi’s legal team has indicated plans to contest the extradition, citing health concerns and alleging political motivations behind the charges.
Nirav Modi, on the other hand, has been in custody in the UK since his arrest in 2019. He is currently fighting extradition to India, with his legal proceedings ongoing. Modi’s case has drawn international attention, highlighting the complexities involved in cross-border financial crimes and the challenges in prosecuting such cases.
The PNB scam has had far-reaching implications, prompting Indian authorities to implement stricter regulations and oversight mechanisms within the banking sector. The Reserve Bank of India discontinued the issuance of LoUs and Letters of Comfort by banks to prevent similar fraudulent activities in the future.
This case underscores the importance of robust internal controls within financial institutions and the need for international cooperation in tackling financial fraud. As the legal proceedings against Choksi and Modi continue, the focus remains on ensuring accountability and reinforcing the integrity of the banking system.