ED writes to 16 other banks, seeks info on loans given to Nirav Modi, Mehul Choksi

The Enforcement Directorate (ED) seems to have turned the tide towards the other banks in the Rs 11,400-crore Punjab National Bank (PNB) fraud, which has shaken up the entire banking system in the country, hence raising questions over the credibility about these public sector banks to keep the public money safe. As per the information, total 16 banks have been asked by the ED to give details of all the loans offered to Nirav Modi and Mehul Choksi – who are on the run since the fraud came to light two weeks ago – nature of the loans, and collateral offered against these loans. According to some estimates, total losses of these public sector banks could well swell up to over Rs 20,000 crore if the ED finds out ‘bending of norms’ in their cases too.

The ED’s decision to seek information on the loans offered to the duo seems to be motivated from the allegation that some banks offered huge loans to the duo’s companies at just 12 per cent collateral, which put them at the risk of not being able to recover in case of a ‘PNB-like’ fraud. To make things even worse, it has been alleged that many of these loans fall in special mention account of second category, meaning they were at the cusp of turning into non-performing assets when these loans were offered.

The Indian Express has quoted an official saying the agency “want(s) to see on what basis these loans were granted and whether these are still recoverable. However, we have not asked any bank to file a complaint with us.” The report also indicates that more than two dozen banks, which offered loans to Nirav Modi and Choksi, could be exposed to loans between Rs 5,000 crore and Rs 10,000 crore. As many as 37 banks have lent money to Mehul Choksi’s companies, which amount to around Rs 3,000 crore; Nirav Modi’s firms also owe similar amount to total 17 banks.

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The government had moved the Mumbai bench of the National Company Law Tribunal (NCLT) to confiscate all 114 properties owned by beleaguered diamantaire Nirav Modi and his maternal uncle and partner Mehul Choksi on Friday. The Ministry of Corporate Affairs (MCA) is said to have also moved the NCLT for the attachment of assets belonging to Modi’s wife Ami Modi, and brother Neeshal.

With the ED attaching the properties of the duo diamantaires, it seems unlikely that they would be able to repay the loans taken by them from these banks. Nirav Modi, in a letter to PNB, has already said his companies owed the bank much less amount than alleged, and by going public it had jeopardised the chances of recovery. The PNB, however, has again asked him to come up with a concrete repayment plan.

The Central Bureau of Investigation (CBI), which is also probing the case, has already arrested Vipul Ambani, who was the Chief Financial Officer of Nirav Modi’s Firestar Diamond. The information provided by him could be crucial in the case as he was allegedly in the direct contact of PNB officials in Mumbai as well as in the Delhi head office. The CBI has also arrested a General Manager-rank officer of the Punjab National Bank, Rajesh Jindal, who is posted at the bank’s head office in New Delhi in connection with the case. Rajesh Jindal was the head of the Brady House, Mumbai, from 2009 till 20011.

Ever since the PNB scam has unfolded, the investigation agencies have begun its crackdown on the properties of Nirav Modi and his uncle Mehul Choksi, but have been clueless about their whereabouts. The fraud revelation that started from Rs 280 crore has reached over Rs 11,400 crore and could reach over Rs 20,000 crore as the agency officials warn of many more skeletons in the closet.

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