The $1.8 billion bank fraud unveiled at a single branch in Mumbai of Punjab National Bank (PNB), one of India’s largest state-owned lenders, has rattled the country’s banking sector.
The man accused of being at the centre of the scam is Nirav Modi (no relation to Prime Minister Narendra Modi), a soft-spoken Mumbai jeweller and diamond merchant whose pieces have been worn by Hollywood stars and India's elite.
Allegedly, certain employees issued letters of undertaking, a form of guarantee, to other banks so that companies linked to Mr Modi could take out loans – which were essentially unsecured – from overseas branches.
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How India's biggest bank fraud was discovered
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Several arrests have been made, including of PNB employees, in connection with the scam. Mr Modi is understood to be outside of the country.
This comes as India's banks – and state run lenders in particular – are already struggling under the heavy burden of ballooning bad debt, amounting to almost $150bn, according to unpublished Reserve Bank of India data reported by Reuters. Share prices in India's banking sector have taken a hit following the scandal.
While an investigation is under way, the extent of the loss remains unknown. Banks and regulators have raced full throttle to review procedures they have in place to prevent and detect such scams.
"Is this the tip of the iceberg?" asks Ramesh Bhojwani, a Mumbai independent equities analyst and investor. "Are there more skeletons in the cupboard? This is something that's being looked at at all the public sector banks and all the private sector banks." In the wake of the PNB case, India's Central Bureau of Investigation is investigating the owner of Indian pen company Rotomac, Vikram Kothari, after a complaint from another state run lender, Bank of Baroda. He is accused of defaulting on loans totalling more than 36bn rupees (Dh2.04bn) from a consortium of several Indian banks.
The scandal shows "there's a deep malaise", says N Chandramouli, the chief executive of TRA, a Mumbai brand and research consultancy. "And unless you take care of systems, processes, technology, you will probably see more of this. So you need to have both action which is reprimanding and correcting this particular issue. The entire process of banking and loans, easy loans or wrong types of loans, should be definitely corrected."
Any scams can result in investors and the public losing confidence, which can ultimately hit banking flows given that the “entire banking system is based on trust”, he says.
The government and banks should take action, because if “you lose trust, everything can go down”.
The fraud case has become a political issue, with the ruling and opposition parties both throwing accusations at each other for being responsible for a scam of this magnitude being possible.
The government has said that anyone found guilty of trying to defraud the banking system would be punished, regardless of their position in society.
Finance Minister Arun Jaitley, speaking at a conference, criticised auditors for their failure to detect the scam and said that "supervisory agencies", without directly naming the Reserve Bank of India, need to look at putting systems in place to deal with irregularities.
In a statement, the RBI maintained it had warned banks in 2016 of potential fraud related to the SWIFT infrastructure.
The regulator said it had ordered banks to strengthen all mechanisms related to the transfer system.
The central bank is also setting up an expert committee to investigate what it describes as “the rising incidence of fraud in the Indian banking system”.
India is not the only country that has been hit by rogue bank employees or criminals targeting the SWIFT payments system.
In 2016, hackers made away with $81 million after attacking Bangladesh’s central bank before the New York Federal Reserve was alerted, preventing a potential $1bn heist.
In a letter that has been widely published in the Indian press, Mr Modi hit back at PNB, saying the liabilities are less than half the amount specified by the lender.
In his letter addressed to the bank, he said because the bank went public with the matter, properties and stores have been raided.
The frenzy around the scandal has “destroyed my brand and the business and have now restricted your ability to recover all the dues leaving a trail of unpaid debts,” he wrote.
Bollywood actress Priyanka Chopra, who was a brand ambassador for Mr Modi's designer jewellery line, ended her contract with the brand, according to the Press Trust of India.
There have been job losses at Mr Modi's firms, as well as concerns the scandal could have knock-on effect on the broader multibillion-dollar gems and jewellery sector in India.
“Bank finance to the trade is already guided by stringent norms of the RBI and government of India with detailed internal audits in place on a quarterly and annual basis,” according to a statement from India’s Gem and Jewellery Export Promotion Council.
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Indian police arrest six as inquiry widens into bank fraud
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“This only demonstrates lacunae in [the] internal control system and failure or lack of fraud protection measures within the public sector bank.”
Other accusations that the bank was at fault have also been levelled.
In a filing to the Bombay Stock Exchange, PNB said it had "enough assets [and] capital to meet any liability which is decided as per law".
But the extent of the financial fallout still remains to be seen. Some reports indicate the amount siphoned off from PNB may be as high as $3bn.
“Public sector banks continue to grapple with weak systems, raising questions of why the processes are not centralised, unlike most private banks, where bypassing core banking solutions is not easy,” says Kunal Shah, an analyst at Edelweiss, a financial services firm based in Mumbai.
“At this juncture, investigating agencies have been roped in and it will take some time to ascertain the financial impact on the banking system.”
Banks are already understood to be moving to tighten up systems.
“Most of these banks will ensure that their internal controls are up to the mark now if they are not already,” says Vikram Pandya, the director of FinTech at SP Jain School of Global Management.
“At the end of the day the long-term outcome of this thing will be that you will have more robust systems, you will have more technology in place so banks are able to identify red flags very clearly and you will find more and more involvement of RBI in terms of prevention-based audits.”
How the Indian government handles this issue will “define its mettle”, he says. What will be critical in the minds of the public is that anyone found guilty in the banking fraud is brought to justice.
“If you are able to put whoever who has done this to justice, you are ensuring there is trust in the legal system as well as the banking system,” says Mr Pandya.
“Fraud can happen, but at the end of the day there has to be justice."
Fines for littering
In Dubai:
Dh200 for littering or spitting in the Dubai Metro
Dh500 for throwing cigarette butts or chewing gum on the floor, or littering from a vehicle.
Dh1,000 for littering on a beach, spitting in public places, throwing a cigarette butt from a vehicle
In Sharjah and other emirates
Dh500 for littering - including cigarette butts and chewing gum - in public places and beaches in Sharjah
Dh2,000 for littering in Sharjah deserts
Dh500 for littering from a vehicle in Ras Al Khaimah
Dh1,000 for littering from a car in Abu Dhabi
Dh1,000 to Dh100,000 for dumping waste in residential or public areas in Al Ain
Dh10,000 for littering at Ajman's beaches
TO A LAND UNKNOWN
Director: Mahdi Fleifel
Starring: Mahmoud Bakri, Aram Sabbah, Mohammad Alsurafa
Rating: 4.5/5
Votes
Total votes: 1.8 million
Ashraf Ghani: 923,592 votes
Abdullah Abdullah: 720,841 votes
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
ABU DHABI ORDER OF PLAY
Starting at 10am:
Daria Kasatkina v Qiang Wang
Veronika Kudermetova v Annet Kontaveit (10)
Maria Sakkari (9) v Anastasia Potapova
Anastasia Pavlyuchenkova v Ons Jabeur (15)
Donna Vekic (16) v Bernarda Pera
Ekaterina Alexandrova v Zarina Diyas
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
Killing of Qassem Suleimani
Sreesanth's India bowling career
Tests 27, Wickets 87, Average 37.59, Best 5-40
ODIs 53, Wickets 75, Average 33.44, Best 6-55
T20Is 10, Wickets 7, Average 41.14, Best 2-12
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
MATCH INFO
Fixture: Ukraine v Portugal, Monday, 10.45pm (UAE)
TV: BeIN Sports
More on animal trafficking
THE BIO
Bio Box
Role Model: Sheikh Zayed, God bless his soul
Favorite book: Zayed Biography of the leader
Favorite quote: To be or not to be, that is the question, from William Shakespeare's Hamlet
Favorite food: seafood
Favorite place to travel: Lebanon
Favorite movie: Braveheart
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
- Grade 5 = between grades B and C
- Grade 4 = grade C
- Grade 3 = between grades D and E
- Grade 2 = between grades E and F
- Grade 1 = between grades F and G
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
The major Hashd factions linked to Iran:
Badr Organisation: Seen as the most militarily capable faction in the Hashd. Iraqi Shiite exiles opposed to Saddam Hussein set up the group in Tehran in the early 1980s as the Badr Corps under the supervision of the Iran Revolutionary Guards Corps (IRGC). The militia exalts Iran’s Supreme Leader Ali Khamenei but intermittently cooperated with the US military.
Saraya Al Salam (Peace Brigade): Comprised of former members of the officially defunct Mahdi Army, a militia that was commanded by Iraqi cleric Moqtada Al Sadr and fought US and Iraqi government and other forces between 2004 and 2008. As part of a political overhaul aimed as casting Mr Al Sadr as a more nationalist and less sectarian figure, the cleric formed Saraya Al Salam in 2014. The group’s relations with Iran has been volatile.
Kataeb Hezbollah: The group, which is fighting on behalf of the Bashar Al Assad government in Syria, traces its origins to attacks on US forces in Iraq in 2004 and adopts a tough stance against Washington, calling the United States “the enemy of humanity”.
Asaeb Ahl Al Haq: An offshoot of the Mahdi Army active in Syria. Asaeb Ahl Al Haq’s leader Qais al Khazali was a student of Mr Al Moqtada’s late father Mohammed Sadeq Al Sadr, a prominent Shiite cleric who was killed during Saddam Hussein’s rule.
Harakat Hezbollah Al Nujaba: Formed in 2013 to fight alongside Mr Al Assad’s loyalists in Syria before joining the Hashd. The group is seen as among the most ideological and sectarian-driven Hashd militias in Syria and is the major recruiter of foreign fighters to Syria.
Saraya Al Khorasani: The ICRG formed Saraya Al Khorasani in the mid-1990s and the group is seen as the most ideologically attached to Iran among Tehran’s satellites in Iraq.
(Source: The Wilson Centre, the International Centre for the Study of Radicalisation)
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%3Cp%3E%3Cstrong%3EDeveloper%3A%20%3C%2Fstrong%3ERemedy%20Entertainment%3Cbr%3E%3Cstrong%3EPublisher%3A%3C%2Fstrong%3E%20Microsoft%20Game%20Studios%3Cbr%3E%3Cstrong%3EConsoles%3A%3C%2Fstrong%3E%20PlayStation%204%20%26amp%3B%205%2C%20Xbox%3A%20360%20%26amp%3B%20One%20%26amp%3B%20Series%20X%2FS%20and%20Nintendo%20Switch%3Cbr%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A
MATCH INFO
Uefa Champions League last-16, second leg:
Real Madrid 1 (Asensio 70'), Ajax 4 (Ziyech 7', Neres 18', Tadic 62', Schone 72')
Ajax win 5-3 on aggregate
MATCH INFO
Osasuna 1 Real Madrid 4
Osasuna: García (14')
Real Madrid: Isco (33'), Ramos (38'), Vázquez (84'), Jovic (90' 2)
UFC%20FIGHT%20NIGHT%3A%20SAUDI%20ARABIA%20RESULTS
%3Cp%3E%0D%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMain%20card%3Cbr%3EMiddleweight%3A%3C%2Fstrong%3E%0D%3Cbr%3ERobert%20Whittaker%20defeated%20Ikram%20Aliskerov%20via%20knockout%20(Round%201)%0D%3Cbr%3E%3Cstrong%3EHeavyweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EAlexander%20Volkov%20def%20Sergei%20Pavlovich%20via%20unanimous%20decision%0D%3Cbr%3E%3Cstrong%3EMiddleweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EKelvin%20Gastelum%20def%20Daniel%20Rodriguez%20via%20unanimous%20decision%0D%3Cbr%3E%3Cstrong%3EMiddleweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EShara%20Magomedov%20def%20Antonio%20Trocoli%20via%20knockout%20(Round%203)%0D%3Cbr%3E%3Cstrong%3ELight%20heavyweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EVolkan%20Oezdemir%20def%20Johnny%20Walker%20via%20knockout%20(Round%201)%0D%3Cbr%3E%3Cstrong%3EPreliminary%20Card%0D%3Cbr%3ELightweight%3A%3C%2Fstrong%3E%0D%3Cbr%3ENasrat%20Haqparast%20def%20Jared%20Gordon%20via%20split%20decision%0D%3Cbr%3E%3Cstrong%3EFeatherweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EFelipe%20Lima%20def%20Muhammad%20Naimov%20via%20submission%20(Round%203)%0D%3Cbr%3E%3Cstrong%3EWelterweight%3A%3C%2Fstrong%3E%0D%3Cbr%3ERinat%20Fakhretdinov%20defeats%20Nicolas%20Dalby%20via%20split%20decision%0D%3Cbr%3E%3Cstrong%3EBantamweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EMuin%20Gafurov%20def%20Kang%20Kyung-ho%20via%20unanimous%20decision%0D%3Cbr%3E%3Cstrong%3ELight%20heavyweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EMagomed%20Gadzhiyasulov%20def%20Brendson%20Ribeiro%20via%20majority%20decision%0D%3Cbr%3E%3Cstrong%3EBantamweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EChang%20Ho%20Lee%20def%20Xiao%20Long%20via%20split%20decision%3C%2Fp%3E%0A
Zodi%20%26%20Tehu%3A%20Princes%20Of%20The%20Desert
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3EEric%20Barbier%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%20%3C%2Fstrong%3EYoussef%20Hajdi%2C%20Nadia%20Benzakour%2C%20Yasser%20Drief%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A