PNB Scam Pegged At Rs 25,000 Crore, 1,381 LoUs Issued Fraudulently To Nirav Modi

It’s been more than a year but PNB scam accused Nirav Modi, who absconded days before the state-run lender publicly admitted fraudulent issuance of letters of undertaking (LoUs), is yet to be brought back home to face the law. Modi has been behind bars at Wandsworth prison since his arrest on March 19 on an extradition warrant executed by Scotland Yard on charges brought by the Indian government. A new report has emerged exposing the rot in the system by which Modi’s companies continued the fraudulent practices yet remained undetected for years.

In a fresh revelation, a total of 1,561 Letters of Undertaking (LoUs), valued at Rs 28,000 crore, were issued by PNB to the fugitive diamond merchant, according to Belgian auditor BDO, commissioned by PNB in February 2018.

According to an exclusive report by The Indian Express, “Of these, 1,381 LoUs valued at Rs 25,000 crore have been described by the auditor as being fraudulently issued. It also found that 21 of 23 exporters in whose names the LoUs had been issued were controlled by Nirav Modi and subsequently, 193 LoUs of the value of Rs 6,000 crore were mis-utilized for making payments to the bank.”

In June, Modi's legal team took his appeal against that ruling to the Royal Courts of Justice in London, where a judge was told about the diamond merchant's troubled state of mind in "confidential" documents.

During subsequent hearings, Westminster Magistrates' Court was told that Modi was the "principal beneficiary" of the fraudulent issuance of letters of undertaking (LoUs) as part of a conspiracy to defraud PNB and then laundering the proceeds of crime.

Since his arrest, his legal team, led by solicitor Anand Doobay and barrister Clare Montgomery, have made several bail applications, which have been rejected each time due to Modi being deemed a flight risk.

What is an LoU?

An LoU is a guarantee given by an issuing bank to Indian banks having branches abroad to grant short-term credit to the applicant. In case of default, the bank issuing the LoU has to pay the liability to the credit-giving bank, along with the interest accrued.