Fraudulent transactions worth Rs 11500 crore detected from PNB's Mumbai branch

Punjab National Bank's stock sank almost 10% Wednesday after the company said it "detected some fraudulent and unauthorized transactions" at a branch in Mumbai.

The bank did not explicitly name the people involved but said it had reported the deals to law enforcement agencies and would evaluate later whether it faces any liability arising out of the transactions.

Punjab National Bank has detected fraudulent transactions amounting to more than $1.77 billion involving billionaire jeweller Nirav Modi, his wife, brother and partners.

The jeweller along with his wife Ami Modi, brother Nishal Modi and his maternal uncle Mehul Choksi were booked by CBI after receiving a complaint from PNB in connection with an alleged Rs 280-crore cheating case.

PNB did not say if the cases were related.

The bank said it was committed to "clean and transparent banking" and that it would take a closer look at these transactions and "determine the bank's liability". Based on the fraudulent transactions, "other banks appear to have advanced money to these customers abroad", Punjab National Bank added.

"The CBI and other agencies must investigate all the members of PNB's Credit Approval Committee and the board of directors since such scams can not take place without connivance at the top levels", Utagi told IANS.

This may just be the tip of the iceberg, as the impact of the crime is likely to spill over to other banks, too. "These transactions are contingent in nature".

At that time, these firms, however, contested they have been availing of the facility in the past, but the branch records did not show details of any such facility having been granted to the said firms.

PNB has registered two complaints with the CBI against these transactions. The finance ministry has asked, through the reform agenda circulated to the banks on January 24, that dubious accounts should be scrutinised and appropriate action against fraudsters be taken with zero tolerance, sources said. Other lenders give credit based on the letter of undertaking issued by a bank.

Nirav Modi, his wife Ami, brother Nishal and Mehul Choksi are partners in Diamonds R US, Solar Exports and Stellar Diamonds, which has shops in foreign locations such as Hong Kong, Dubai, and NY.

The amount of fraudulent transactions is equivalent to eight times the bank's net income of about Rs 1,320 crore ($206 million).

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