New Delhi: As a political storm brewed over India's biggest bank fraud, Punjab National Bank on Thursday said billionaire diamantaire Nirav Modi has made "vague" offers to repay some of the USD 1.77 billion he and companies linked to him obtained in loans abroad using fraudulently acquired guarantees of the state-owned lender.
A fortnight after the scam was first reported, PNB Chairman and Managing Director Sunil Mehta said it has the capability to recover the dues from Modi and promised to take action against all wrongdoers.
As the Enforcement Directorate conducted multiple searches on establishments linked to Modi, seizing diamonds, jewellery and gold worth Rs 5,100 crore and sealing six properties, the finance ministry said recovery would be made and nobody will be spared.
"Whole lot of assets will be recovered. Nobody will be spared," Financial Services Secretary Rajiv Kumar said, adding that the scam was an "isolated case of a single branch" and is not likely to escalate to other banks.
PNB has already suspended 10 officers and referred the matter to CBI for investigation.
Opposition seized on the issue, with Congress releasing a picture of Nirav Modi in the business delegation that met Prime Minister Narendra Modi in Davos at the World Economic Forum last month.
"Guide to looting India by Nirav Modi--1. Hug PM Modi 2. Be seen with him in DAVOS. Use that clout to: A. Steal 12,000 crore B. Slip out of the country like Mallya, while the government looks the other way," party president Rahul Gandhi tweeted.
Attacking the government, Aam Aadmi Party alleged that Nirav Modi could flee the country because he had access to the Prime Minister's Office.
Modi, who grew up in Antwerp and has boutiques in cities including New York, London, Beijing, Hong Kong and Singapore, left the country on January 1, much before the CBI received a complaint from PNB on January 29, putting an initial estimate of the fraud at Rs 280 crore.
His brother Nishal, a Belgian citizen, also left the country on January 1, while wife Ami, a US citizen, and business partner Mehul Choksi, the Indian promoter of Gitanjali jewellery chain, departed on January 6, officials said.
PNB alleges that Modi, his wife and brother worked with some officials at a Mumbai branch to obtain letters of undertaking in 2011 without following due procedures. The officers did not record transaction entries in the bank's systems but transmitted instructions to foreign branches of banks including Union Bank of India, Allahabad Bank and Axis Bank through the SWIFT global payment system.
The case came to light when Modi's companies sought a fresh loan last month. By then, the officials who were allegedly conniving with them had retired and the new ones asked for 100 per cent cash margin to issue the letters. When Modi's companies insisted that they had used the facility before, PNB got alerted.
"This cancer that's been going on since 2011, we have brought it out and we are resolving it," PNB's Mehta said at a press conference, adding that the bank would honour all its commitments. "If the entire onus is on us, we will take responsibility."
Mehta said the bank detected the fraud and has referred the matter to the law enforcement agencies.
"Nirav Modi has not come out with any concrete plan to repay so far. But they're coming out with some vague offers, which are under examination," Mehta said.
Modi, he said, has not come to the bank "personally" and "we have requested to him to come and give us a written plan and how he is going to make a repayment".
He said Modi had sent a formal message last week.
Asked about recovery of the amount, Mehta said the process has been initiated and the Enforcement Directorate has started seizing assets. "We are trying to protect the interest of all the lenders," he said.
He said the bank was examining its whole system. "If we find any loopholes, we will plug them up," he said, adding it was a standalone case limited to one of its branches in Mumbai. He also said all other branches of the bank have been scanned to check any fraudulent activity.
Mehta further said that the government too was examining the issue on day-to-day basis.
"The matter is under investigation. We have not received any direction from our regulator RBI in the matter but they are our regulator, whatever direction they will give we will comply," Mehta said.
On the amount of provisioning the bank would be required to make, the CMD said it was difficult to give any technical number "right now" as the matter was under investigation.
He, however, said the bank will honour all its bona-fide commitments. "We want to convey to all our stakeholders that PNB is pursuing clean banking agenda as a responsible bank."
He also said the bank conducts forensic audit where it has doubt that fraud has been committed.
"This is the thing which is already documented so we may not require it. But if there is need be we may go for it," he said, amid volley of questions from reporters at the press conference.
The PNB CMD further said the bank has informed all other lenders about the case.
"We have issued advisory as well to them. We were the first to inform SEBI about this under the disclosure norms. So all these things are as per our clean banking agenda," Mehta added.
In the last 123 years, he said the bank has seen many ups and downs.
"The bank in its full capacity will take every action to book wrongdoers. This fraud had started in 2011. Our own bank detected first and told the law enforcement agencies about this. PNB is fully committed to its clean banking policy. That is why we are the first one to detect and report this to the various law enforcement agencies," he said.
PNB shares continued to bleed for the second day in a row, ending with a steep loss of 12 per cent at Rs 128.35 apiece on BSE.
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