PNB Fraud: A Fact-Check on the Timeline and Action Taken

PNB Fraud

The Janta Ka Reporter story ‘Here’s why Modi govt will find it impossible to emerge unscathed from PNB scam’, published February 15, 2018, talks about the alleged PNB fraud, involving jeweller Nirav Modi, among others. The article talks about how the current government will find it “impossible” to emerge unscathed from PNB scam, attempting to pin the blame for what happened at PNB on the dispensation in office. Let us, then, check the logic of the piece and the facts.

Incorrect Claims by Janta Ka Reporter

Let us first get a blatant factual error out of the way. The Janta ka Reporter story claims the following:


Let us first get a blatant factual error out of the way. The Janta ka Reporter story claims the following:


As we can see, the letter was about the complaint reportedly lodged against Mehul Choksi and Gitanjali Gems and not against Nirav Modi as claimed by the article.

The article also claims “What’s even more disturbing are the media reports that Nirav Modi and his brother allegedly had a private meeting with PM Modi in Davos.”

There is no evidence or record of a private meeting between PM Modi and Nirav Modi at Davos. The claim is therefore purely in the realm of speculation and/ or misreporting.

We will next explore the question of the PNB fraud per se and as we had shown in our article yesterday “PNB Fraud and the Issue of Bad Loans: The Big Picture”, it will not leave Mr Rahul Gandhi and Ms Priyanka Chaturvedi’s party in an enviable position.

The PNB Fraud: The Timeline and the Facts

Let us begin by looking at the timeline of the alleged PNB fraud.

When did it all start? It started back in 2011, when some PNB employees issued reportedly fake letters of undertaking (LoUs) for firms owned by Nirav Modi and his family. LoUs work like bank guarantees, against which overseas branches of other banks provide credit through networks like SWIFT. Gokulnath Shetty, a deputy manager at PNB, allegedly used his access to the SWIFT network to authenticate guarantees given on LoUs. Basically, the LoUs helped Nirav Modi’s companies raise credit.

Where was the current Prime Minister and his government in 2011? There not in office at the Centre, were they? No. It was under the last administration, when Manmohan Singh was Prime Minister that the fake LoUs were issued. All the fraudulent loans were given against the fake LoUs issued during the last government – the Congress’s government. The act of giving credit stemmed from those fake LoUs. So, the entire alleged fraud at PNB involving Nirav Modi is very much a scam of the UPA era.

The fraud has come to the surface during the tenure of the current government. If it would have been complicit in the fraud, would logic dictate that the fraud would have come to light?

The Janta Ka Reporter article has also pursued the question as to why Nirav Modi, et al involved in the fraud were “allowed” to leave the country. This question-cum-allegation is wholly in the domain of speculation with no evidence that anybody was allowed to “flee” or “leave” with the connivance
of the government.

Now, Nirav Modi reportedly left the country on January 1, 2018 and Mehul Choksi left reportedly on January 4. Below is what the CMD of PNB stated yesterday:

Thus, the fraud was detected in the third week of January. It was thereafter immediately investigated over the next few days. Right after that, the FIR with the CBI was filed by PNB on January 30, 2018. Most of the people involved in the fraud had left before this date. The authorities cannot nab a person or his family without substantial evidence, can they? And they certainly cannot do so without even knowing that they were involved in fraud – in fact, without even knowing that there was a fraud.

How and why such frauds or scams are being detected now and how this case too ties in with the larger problem with PSBs have been explored and explained in our article “PNB Fraud and the Issue of Bad Loans: The Big Picture”. In brief, the structural reforms and strict systemic overhauls and regulations that the current government has been bringing about appear to be responsible for the detection of such scams. After all, the bad loans and NPAs problem was created by the UPA government’s policies and practices. It was left to the current government to first of all ascertain the quantum of bad loans and NPAs, an exercise which it began in 2015.

A final fact that must be emphasised is what was done once the fraud was detected and the spate of action since. Once the fraud had been reported, the Enforcement Directorate (ED) began carrying out raids at several properties linked to Nirav Modi and his associates and has seized valuables. As per latest reports, the IT Department has attached 21 of his bank accounts. Nirav Modi has been asked by the ED appear within 7 days. Further, the government has suspended their passports for four weeks and the Ministry of External Affairs has reportedly given Nirav Modi and Mehul Choksi 7 days to respond to the passport suspension as to why the passports should not be revoked. In short, the action is continuous breaking news in the public domain.

Thus, to sum up, the alleged PNB fraud began under the watch of the last government. It was detected under the watch of the present government, following which detection, a spate of speedy and sweeping action has been unleashed.