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What is Punjab National Bank Case ? | PNB Fraud case | Facts of the case

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Whats the Case of fraud in PNB:

You think your money is safe with the banks.??

Case study on PNB bank Fraudulent transactions of $1.77 billion (11,300 Crores )

Whats the Case:

According to details included in the initial complaint filed by PNB with the CBI, the issue was detected at the bank’s mid corporate branch at Brady House, Mumbai in mid-January.

Three firms – M/s Diamonds R US, M/s Solar Exports, M/s Stellar Diamonds – approached the bank for

‘buyers credit’ to make payments to overseas suppliers. According to the complaint, Nirav Modi, Nishal

Modi, Ami Nirav Modi and Mehul Choksi were partners in these firms.

What is Buyers Credit:

Buyers credit is short term credit (90-180 days) provided by international banks (or international branches

of Indian banks) to an importer. This credit is typically provided based on a ‘letter of comfort’ issued by the

importer’s local bank.

When the above three firms approached PNB in January for buyers credit via a ‘letter of comfort’, the

concerned official sought a 100 percent cash margin since there was no pre-sanctioned limit for these


What This Means for PNB

Shares of PNB fell 9.8 percent in trade on Wednesday following the disclosure made by the lender.

Bankers who BloombergQuint spoke to said that typically the final liability in such cases lies with the bank

which has issued the LoU. In its statement, PNB said that its liabilities in the case were “contingent in

nature” and that they would be paid out depending on genuineness of the underlying transactions.

Action taken as of now:

CBI will initiate the proceedings in this case.

10 PNB officials has been suspended after the reporting of the incidents.


As of the December 2017 ended quarter, PNB had bad loans amounting to 12.11 percent of total loans.

The bank, which reported a profit of Rs 207 crore during the October-December quarter, just received

capital infusion of Rs 5,473 crore via the government’s recapitalisation bonds.

This is not the first time that PNB has seen trouble emerging from its dealings with the gems and jewelry

sector. The bank was one of the lead lenders in the Winsome Diamonds case, where the company’s

promoters defaulted on nearly Rs 5,000 crore in bank loans.

What we have learnt:
– Big PSUs banks also not safer these days and due to mismanagement at the higher level such cases emerged.

– Govt. is trying to infuse more capital to these bonds and ultimately they’re using the Investors money or taxpayers money.

– One day these banks will collapse and Govt. have to bail out these banks from the tax payers money.

– Due to weak Law and order, Persons who’re involving in these remained free at the end or they leave the country like Vijay Mallaya.

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