Economic Fraud
Revisiting the Rs 13,000 Crore PNB- Nirav Modi Scam that shook the Indian Banking System ! Click For Latest Updates
The Nirav Modi scam, also known as the Punjab National Bank (PNB) fraud, is India’s largest banking scam, exposing the vulnerabilities of the country’s financial system.
Scam Name: Punjab National Bank (PNB) Fraud
Fraudulent Amount Involved: Rs 13,578 crore (approximately $2 billion)
Place: Mumbai, India
Prominent Scammer’s Name: Nirav Modi, Mehul Choksi
Modus Operandi: Nirav Modi, a celebrity jeweler, and his uncle Mehul Choksi, owner of Gitanjali Gems, conspired with PNB employees to secure fake letters of undertaking (LoUs) without collateral. These LoUs were used to obtain loans from other banks, which were then used to pay off earlier loans. The scam went undetected for years due to negligence and collusion by bank officials. The fraud was uncovered in 2018 when PNB discovered the fake LOUs.
Current Legal Status: Nirav Modi is in extradition proceedings in the UK, while Mehul Choksi is in Antigua and Barbuda, fighting extradition.
Preventive Measures: Stricter monitoring of LoUs, regular audits, and implementation of robust risk management systems could have prevented this crime. Additionally, whistleblower protection and a culture of transparency within banks could have encouraged earlier reporting of suspicious activity. The use of technology, such as blockchain and artificial intelligence, could have also detected fraudulent transactions. Furthermore, stricter regulations and oversight by the Reserve Bank of India (RBI) could have prevented the scam. The incident highlights the need for a comprehensive overhaul of India’s banking regulations and fraud detection systems.