On Valentine’s Day, one of India’s biggest banks disclosed a $1.77 billion fraud allegedly by one of the country’s richest men, who deals in pearls and diamonds. Shares of the lender, Punjab National Bank, plunged on the news, dragging down other lenders when it said the scam may extend to multiple banks.

Main People Involved

PNB has alleged that the Modis and companies linked with them colluded with Gokulnath Shetty (who was the previous employee of PNB bank posted in Mumbai branch as Deputy General Mangaer ) to pull off the heist. The bank claims they used fake PNB guarantees worth $1.77 billion to obtain loans from the overseas branches of Indian banks, claiming to need the cash to import pearls, according to documents made public or seen by Bloomberg.

HOW DID IT ALLEGEDLY START?

The fraud allegedly dates back to 2011, said Rajiv Kumar, India’s top bureaucrat for the bank sector. Between then and January 2017, Shetty issued several fake PNB letters of undertaking -- without any collateral -- for Modi, PNB said.

HOW DID IT COME TO LIGHT?

It came to light last month, when representatives of Modi’s companies approached PNB for a fresh loan, PNB said in its complaint, the details of which have been made public.
By then, Shetty had retired and his successor declined to honor Modi’s request.“At this, the firms contested that they have been availing this facility in the past also but the branch records did not reveal details of any such facility,” PNB said in the complaint. This was when it discovered the fake letters of undertaking and filed an initial complaint alleging a $44 million fraud. Two weeks later, it filed another complaint covering transactions worth about $1.77 billion, according to people familiar with the matter.

Below are some links going through which this scam can be known more deeply :

https://www.ndtv.com/business/pnb-fraud-issuing-lous-in-favour-of-nirav-modi-began-a-decade-ago-details-here-1815831