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.


‘No sign of waning appetite for oil’

Updated 12 min 6 sec ago
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‘No sign of waning appetite for oil’

  • Oil is so entrenched in the modern world that demand is still rising by up to 1.5 percent a year
  • Of the almost 100 million barrels of oil consumed daily, more than 60 million bpd is used for transport

LONDON: Global oil consumption will reach 100 million barrels per day (bpd) — more than double the level of 50 years ago — in months, according to an industry report by Reuters.
Despite overwhelming evidence of carbon-fueled climate change and billions in subsidies for alternative technologies such as wind and solar power, oil is so entrenched in the modern world that demand is still rising by up to 1.5 percent a year, said the report.
There is no consensus on when world oil demand will peak but much depends on how governments respond to global warming, according the International Energy Agency (IEA), which advises Western economies on energy policy.
OPEC Secretary-General Mohammed Barkindo told a conference in South Africa on Sept. 5 that global consumption would hit 100 million bpd this year, sooner than anyone had expected.
With a sophisticated global infrastructure for extraction, refining and distribution, oil produces such a powerful burst of energy that it is invaluable for some forms of transport such as aircraft.
Of the almost 100 million barrels of oil consumed daily, more than 60 million bpd is used for transport. Alternative fuel systems such as battery-powered electric cars still have little market share.
Much of the remaining oil is used to make plastics by a petrochemicals industry that has few alternative feedstocks.
Although government pressure to limit the use of hydrocarbons such as oil, gas and coal is increasing, few analysts believe oil demand will decrease in the next decade.
If the current mix of policies continues, the IEA expects world oil demand to rise for at least the next 20 years, heading for 125 million bpd around the middle of the century.