NEW DELHI: The exposure of Indian banks in the alleged fraud involving jeweller Nirav Modi, his relatives and associated companies may touch Rs 20,000 crore, said bankers and government officials, almost twice the initial estimate.
The amount cited above would include bonafide credit to related firms that now risks being classified as bad debt given that the promoters have been accused of fraud. The amount involved was initially pegged at Rs 11,300 crore. However, the government isn’t unduly worried as it’s already seized assets of substantial value, said the official cited above.
“We are not overtly concerned about the amount involved as various investigating authorities, including the Enforcement Directorate, have already attached assets worth Rs 6,000 crore, which includes stocks of gold, diamond and precious stones,” he said.
The finance ministry will soon call a meeting of all staterun banks to ensure that all accounts of the entities said to be involved are traced and the exact extent of any fraud ascertained.
“The meeting can be held as soon as next week, where we will assess the total exposure, steps taken by banks and the further course of action,” a finance ministry official said.
The companies currently under the scanner include Solar Export, Stellar Diamond, Diamond R US, Gitanjali Gems, Gili India, Nakshatra and Chandri Papers, apart from Modi and his relatives.
SBI has an exposure of around Rs 1,360 crore against the letters of undertaking (LoUs) issued by PNB. SBI chairman Rajnish Kumar had said the bank had some exposure to Gitanjali Gems, owned by Mehul Choksi, uncle of Nirav Modi. Allahabad Bank has disclosed it has an exposure of Rs 2,000 crore against the LoUs.
Union Bank has an exposure of Rs 2,000 crore and UCO Bank about Rs 2,652 crore.
The banks have been squabbling over liability. PNB has said it will honour all claims based on LoUs that weren’t rolled over from the original 90 days and challenge the rest. The counterparty banks will contest this.
Banks have already been asked to identify both fund and non-funded exposure, which includes letters of credit and LoUs, to these firms and what assets have been hypothecated.
“The banks will have to explain whether such exposure has been secured against any collateral and if all the procedures have been followed against lending,” said a bank executive aware of the development. The FinMin has already written a letter to all state-owned banks directing them to check for similar fraudulent practices.