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Nirav Modi fraud costs PNB Rs 14357 crore

15 May 2018

They said the present charge sheet, filed in a special court in Mumbai, primarily deals with the first FIR registered in the case relating to the fraudulent issuance over Rs 6,498.20 crore worth of LoUs to Diamond R US, Solar Exports and Stellar Diamonds.

Banking secretary Rajiv Kumar told media that a government nominee on the board of state-run Allahabad Bank would call a meeting to seek the removal of the lender's chief executive Usha Ananthasubramanian, who previously headed fraud-hit Punjab National Bank (PNB).

Ananthasubramanian headed PNB between August 2015 and May 2017, before she was moved out to Allahabad Bank.

CBI has also booked KV Brahmaji Rao and Sanjiv Sharan, both Executive Directors and Nehal Ahad, GM (International) in its chargesheet.

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They said that a separate chargesheet in the second case involving Choksi will be filed later.

"The (PNB) board has made a decision to divest EDs of the functional and financial responsibilities and have also requested the government to replace them", Kumar said, adding the government is committed to taking strict action against erring officials. The stock exchanges had asked a query from the bank asking if its CEO was charged by CBI in the PNB fraud.

After the IOB fraud had surfaced, the RBI had issued guidelines and circulars to prevent such frauds in the banks which were allegedly not implemented in PNB in its entirety, they said. Sources said that while Modi is suspected to be in Honk Kong, Mehul Choksi is most likely in the US.

The agency has detailed the roles of Nirav Modi, his brother Nishal Modi and Subhash Parab, an executive in Nirav Modi's company, officials said. After initially disputing its liability, PNB paid seven banks Rs6,500 crore towards these letters of understanding (LoUs).

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PNB was allegedly defrauded by some of its branch level employees who in connivance with Nirav Modi had issued letters of undertaking without following the bank's prescribed procedures since 2011 which ballooned into a big scam.

Ananthasubramanian was previously chairperson and managing director of Bharatiya Mahila Bank, country's first all-women bank, which was merged with State Bank of India in April 2017. Since the bank's SWIFT, an worldwide messaging system, was not integrated with its core banking system, the fraud went undetected for seven years.

Allahabad Bank's share prices dipped 8.6% Tuesday to Rs 40.40 on BSE. "Reconciliation of SWIFT (Society for Worldwide Inter-Bank Financial Telecommunication) messaging system CBS was not done despite repeated caution notices of the RBI", a CBI official said.

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Nirav Modi fraud costs PNB Rs 14357 crore