In a filing with Bombay Stock Exchange, PNB said the transactions were "for the benefit of a few select account holders with their apparent connivance" and that 'based on these transactions, other banks appear to have advanced money to these customers overseas. "Based on these transactions, other banks appear to have advanced money to these customers overseas", it said in a statement posted on the website of the city's stock exchange. In spite of the fact that the bank did not name any individual or organization, it had held up a protest with CBI on January 31 naming extremely rich person jewel dealer Nirav Modi and a couple of others in a Rs 280-crore extortion. Based on this, foreign branches of Indian banks offer credit to buyers. The report filed by the lender with the CBI also named two employees for colluding with Modi.
The latest case, which involves a sum considerably higher than Vijay Mallya's default of around Rs. 9,000 crore, comes at a time when the Indian banking system is already grappling with swelling non-performing assets. Two PNB bank officials, retired deputy manager Gokulnath Shetty and SWO Manoj Hanumant Kharat, were the first to be detected as working with Nirav Modi. Individuals in PNB said the extortion became known after an official, named by CBI, resigned the previous summer finishing the unsanctioned rollover of letters of undertaking, in light of which the organizations were raising assets overseas.
After PNB complained to the CBI last week about Nirav Modi's fraudulent transactions, it said that it was digging into its records to understand the magnitude of the loss.
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Earlier today, while addressing a press conference, Congress leader Randeep Surjewala said, "On 26 July 2016, Prime Minister was handed with all papers regarding Nirav Modi and one of his relative". When the bank insisted on guarantees to issue Letters of Understanding (LoU) - an assurance given by one bank to another as security to meet liabilities on behalf of a customer - the companies allegedly said they had used the facility before.
What does acquiring fraudulent letters of undertaking mean?
The investors of the bank lost over Rs 3,900 crore worth of wealth in a single day. According to a report by TOI, the premises raided by the ED includes Modi's residence in Kurla, his jewellery boutique in Kala Ghoda area, three company locations in Bandra and Lower Parel, three premises in Surat in Gujarat and Modi's showrooms in Chanakyapuri and Defence Colony in Delhi.
The upcoming days will certainly be very interesting for India's banking industry.