India’s PNB bank fraud likely to swell beyond $2 billion mark

Punjab National (PNB) and police have accused two jewelry groups of colluding with bank employees to get credit from overseas banks using fraudulent guarantees. (Reuters)
Updated 06 March 2018
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India’s PNB bank fraud likely to swell beyond $2 billion mark

MUMBAI: The extent of the unraveling fraud at India’s state-run Punjab National Bank could rise beyond the nearly $2 billion mark so far outlined by the lender, according to a source involved in the probe and court documents reviewed by Reuters.
The source, who asked not to be named, said investigators had not yet recovered all the papers and loan guarantees allegedly issued by rogue employees of the bank, and consequently believed the bank’s exposure could be greater than revealed so far.
In what has been dubbed as the biggest fraud in India’s banking history, Punjab National (PNB) and police have accused two jewelry groups — one controlled by diamond tycoon Nirav Modi and the other by his uncle Mehul Choksi — of colluding with bank employees to get credit from overseas banks using fraudulent guarantees.
Both Choksi and Modi have denied the allegations and lawyers for the two key accused PNB employees in the case have also said they are innocent.
According to court filings, the exposure to three companies controlled by Modi has been estimated at 64.98 billion rupees ($999 million), while firms controlled by Choksi have been accused of defrauding the bank of 61.38 billion rupees.
India’s federal police, the Central Bureau of Investigation (CBI), has told a Mumbai court that the amount involving Modi’s companies was likely to go up, according to the source and court filings, copies of which have been reviewed by Reuters.
The CBI told the court that its investigation had found that the fraudulent issuance of letters of undertaking (LoUs), or guarantees, through a Mumbai branch of the bank had been going on since 2010.
In papers filed on Monday, the CBI also said PNB did not have all the documents related to the LoUs, since those were returned to the borrower.
“Most of these documents are not yet recovered. The size of the fraud has now gone (up)...and the same is likely to go even higher,” the CBI said in the court filing.
PNB did not respond to requests on Tuesday seeking comment on the risk of its exposure rising further.
The bank initially reported to authorities on Jan. 29 that the jewelry groups had defrauded it of 2.8 billion rupees, or about $44 million. On Feb. 14 it said the fraud sum had reached $1.77 billion after a detailed investigation.
It raised the amount further to nearly $2 billion last week, saying it had discovered some $200 million more in fraudulent letters of credit, another form of credit guarantee, issued to Choksi’s Gitanjali group.


US wins WTO ruling against China grain import quotas

Updated 19 April 2019
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US wins WTO ruling against China grain import quotas

GENEVA: The United States won a World Trade Organization (WTO) ruling on Thursday against China’s use of tariff-rate quotas for rice, wheat and corn, which it successfully argued limited market access for US grain exports.
The case, lodged by the Obama administration in late 2016, marked the second US victory in as many months. It came amid US-China trade talks and on the heels of Washington clinching a WTO ruling on China’s price support for grains in March.
A WTO dispute panel ruled on Thursday that under the terms of its 2001 WTO accession, China’s administration of the tariff rate quotas (TRQs) as a whole violated its obligation to administer them on a “transparent, predictable and fair basis.”
TRQs are two-level tariffs, with a limited volume of imports allowed at the lower ‘in-quota’ tariff and subsequent imports charged an “out-of-quota” tariff, which is usually much higher.
The administration of state trading enterprises and non-state enterprises’ portions of TRQs are inconsistent with WTO rules, the panel said.
Australia, Brazil, India, and the European Union were among those reserving their rights in the dispute brought by the world’s largest grain exporter.
In a statement, US Trade Representative Robert Lighthizer and Secretary of Agriculture Sonny Perdue welcomed the decision, saying China’s system “ultimately inhibits TRQs from filling, denying US farmers access to China’s market for grain.”
If China’s TRQs had been fully used, $3.5 billion worth of corn, wheat and rice would have been imported in 2015 alone, it said, citing US Department of Agriculture estimates.
The two WTO rulings would help American farmers “compete on a more level playing field,” the USTR statement said, adding: “The (Trump) Administration will continue to press China to promptly come into compliance with its WTO obligations.”
The latest WTO panel said that the United States had not proven all of its case, failing to show that China had violated its public notice obligation under the General Agreement on Tariffs and Trade (GATT) in respect to TRQs.
China’s Ministry of Commerce said in a statement on Friday it “regrets” the panel’s decision and that it would “earnestly evaluate” the panel’s report.
China would “handle the matter appropriately in accordance with WTO dispute resolution procedures, actively safeguard the stability of the multilateral trading system and continue to administer the relevant agricultural import tariff quotas in compliance with WTO rules,” it said.
Either side can appeal the ruling within 60 days.