Wednesday, 18 July, 2018

RBI Limits issuance of Letter of Undertaking After Nirav Modi Incident

Reuters Reuters
Nellie Chapman | 14 March, 2018, 10:48

Companies linked to Nirav Modi obtained Letters of Undertaking (LoUs), which were used to get loans from overseas branches of Indian banks, up to five guarantees on a single day, with the help of rogue employees of the country's second biggest state-run bank.

Punjab National Bank reported fraudulent issuance of LoUs / Foreign Letters of Credit for payment of import bills and fraudulent transactions in accounts amounting to Rs12,967.86 crore to RBI through its fraud monitoring reporting system. CBI and Enforcement Directorate officials are looking into the case. Billionaire diamond trader Nirav Modi, his wife Ami and brother Nishal Modi also named in the fraud.

Punjab National Bank told police on Tuesday that it had uncovered additional exposure of about 9.42 billion rupees ($144.83 mln) to Gitanjali group of companies, taking its overall exposure in connection with the fraud to well over the $2-billion mark.

It also said that the fraud related to Choksi-controlled firms is now found to be to the tune of Rs 7,080 crore.

The list of seized properties includes a 6,000 sq ft farmhouse and land at Alibaug in Maharashtra, now valued at Rs 42.70 crore.

The agency in front of a Mumbai court expressed their helplessness and requested the court to grant power to sub-inspectors to probe the case under Section 17 of the Prevention of Corruption Act, 1988. Special judge SR Tamboli allowed the plea. The investigating agency further submitted that there is a shortage of officers of the rank of inspectors and above in the CBI Bank Securities and Fraud Cell. "As on date, one deputy superintendent and two inspectors have been entrusted with the task of investigation".

"However due to the magnitude of the case as stated above their services are falling short".

Banking sources, however, said such an agreement was not yet a done deal.

The maximum punishment for the offence under section 409 of the IPC (criminal breach of trust by public servant, or by banker, merchant or agent) is life imprisonment. The court adjourned the bail hearing to Friday.