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.


Mideast plays key role in Chinese export of armed drones, report says

Updated 17 December 2018
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Mideast plays key role in Chinese export of armed drones, report says

  • China has exploited America’s selective drone export policy to become an increasingly influential player in meeting demand
  • The report is entitled “Armed Drones in the Middle East: Proliferation and Norms in the Region”

BEIRUT: The use of armed drones in the Middle East, driven largely by sales from China, has grown significantly in the past few years with an increasing number of countries and other parties using them in regional conflicts to lethal effects, a new report said Monday.
The report by the Royal United Services Institute, or RUSI, found that more and more Mideast countries have acquired armed drones, either by importing them, such as Jordan, Iraq, Saudi Arabia and the United Arab Emirates, or by building them domestically like Israel, Iran and Turkey.
China has won sales in the Middle East and elsewhere by offering drones — otherwise known as UAVs or unmanned aerial vehicles — at lower prices and without the political conditions attached by the United States.
The report , entitled “Armed Drones in the Middle East: Proliferation and Norms in the Region,” said that by capitalizing on the gap in the market over the past few years, Beijing has supplied armed drones to several countries that are not authorized to purchase them from the US, and at a dramatically cheaper price.
“China, a no-questions-asked exporter of drones, has played and is likely to continue playing a key role as a supplier of armed UAVs to the Middle East,” it said.
The report explored where and how each of the states have used their armed drones and whether they have changed the way these countries approach air power. It found that Iran, the UAE and Turkey all changed the way they employ airpower after they acquired armed drones.
For Turkey and the UAE, armed drones enabled them to conduct strikes in situations where they would not have risked using conventional aircraft, it said. Iran developed armed drones from the outset specifically to enable to project power beyond the reach of its air force, which is hamstrung by obsolete aircraft and sanctions, the report added.
The report said it remains to be seen whether and how the loosening of restrictions on the exportation of armed drones by the Trump administration will alter dynamics in the region.
“Nonetheless, proliferation in armed UAVs in the Middle East is unlikely to stop and could, in fact, even accelerate,” the report said.