Nirav Modi

INTRODUCTION
Nirav Modi ran away by defrauding Punjab National Bank (PNB) of Rs

11400 crore , was the only thing I knew about the biggest banking
sector scam in our country .
It is really important to investigate on the whole matter in order to

know what actually happened and who all were actually involved in the
whole matter, how the process worked and how PNB, India’s second
largest government owned bank , could lend over such a huge amount
to a jewellery designer and now how will PNB get its money back from
Nirav Modi .
This case study will help me to gain knowledge about how the banking
system works in granting such a huge amount of loan and what were
the strategies used by Nirav Modi to incorporate such a scam.
WHO IS NIRAV MODI
Nirav Deepak Modi (born 27 february 1971) is an Indian businessman .

He is the Founder of “ Nirav Modi diamond Jewellery House “ which
was established in 2010 . The company has its headquarters in Mumbai,
India .
As of Nirav Modi’s personal life , Nirav Modi was basically born in

Palanpur,Gujrat , and later his upbringing was done in Antwerp ,
Belgium . Nirav ‘s family is into diamond business for years and
generations . When Nirav was 19 , he along with his father Deepak
Modi came to Mumbai to work in his uncle’s business, Mehul Choksi.
Mehul Choksi is the head of Gitanjali Group which is retail jewellery
company with approx 4000 stores across India . Modi even walked the
red carpet at the Oscars alongside kate winslet ,who was adorned in a
Nirav Modi jewel .
Nirav Modi ,his wife Ami Modi ,brother Nishal Modi and his uncle
Mehul Choksi are partners in diamond R US , Steller Diamonds and
Solar Exports which has retail shops situated in New York , Dubai and
Hong Kong.
HOW A LOAN SYSTEM WORKS
A importer Nirav Modi wants to import pearls or diamonds and sell

them further and as you all know the purchase would require a huge
amount of money . Nirav Modi approaches the Punjab National
Bank(PNB) . Punjab National Bank offered Nirav with loan at an interest
rate of 10 % but Nirav considering it to be high asked for a loan in
foreign currency as importers prefer to take loans in foreign currencies
as interest rates on that are lower . Nirav then asked PNB that who will
give him a forign currency loan , a bank abroad or something as such .
The bank abroad doesnot know him and they don’t have any history of
him so why will they give him money of such a huge amount .
PNB said that they can help him in a getting a foreign currency loan to
buy diamonds , by a giving a guarantee which is “ Letter Of
Understanding” ; a Letter Of Understanding is a provision of bank
guarantee , in a which a bank allows its customer to raise money from
another Indian bank’s foreign branch in the form of a short term credit .
It serves the purpose of a bank guarantee but it should also be noted
that customer should pay the margin money to the bank issuing the
LOU ( Letter Of Understanding )
Now , the foreign bank is ready to lend Nirav Modi the money , because
PNB gave gauntantee in the form of Letter Of Understanding(LOU) .
There is complete process as to how the loan is finally lended . After the
LOU is given to Nirav Modi , an account is created by PNB called a
‘Nostro’ account to which the overseas bank lends the loan .
PNB transmitted SWIFT(the banking messege service,it is like a messege

written in stone, that says PNB will pay in any case if there is a default)
messeges to foreign bank.
NOTE : Overseas bank lends money to PNB’S Nostro account and not to
Nirav Modi . Overseas bank does not even know Nirav Modi . They just
know that PNB has given a guarantee and in any case the customer
does not pays , overseas bank will collect money from PNB .
Nirav did not pay back the money to PNB .Nirav Modi asked a PNB
official to issue another LOU for the debt owed plus interest. (so , say
for example he had initial LOU OF $ 10 million ,the second LOU will be $
11 million to cover the principle and the interest amount of the first
LOU ) . This went on and on until Nirav Modi fell into a debt trap and
the money easily increased into a larger amount , so large to handle
anymore. From sources it was found that PNB have lost Rs 280 crore on
the Jan 2018 LOUs but then the actual amount came out to ne Rs
11,400 crore .
PNB has alleged that the money raised against these LOUs may not
have actually been used to pay for imports but rather for other
purposes , it can even be money laundering .
WHAT HAPPENED THEN?
Nirav kept on taking loans from foreign branches of Indian banks

through an LOU(Letter of understanding) issued by PNB . SWIFT based
LOUs were issued through a corrupted employee at PNB . The orders
never showed up in the core banking system(CBS) for checking purpose
. LOUs kept on rolling since 2011 and possibly kept on increasing and
increasing .
REASON WHY NIRAV COULD NOT PAY IT BACK
Nirav never intended to pay it back to the bank , if he had intensions to

pay then roll overs wouldn’t have been required . Things were going
out of hand that roll overs were required in order to stay current.
HERE’S THE ACTUAL ISSUE
There would have been no problem if Punjab National Bank would have
done things right , they did not take collateral worth the loan granted ,
had they taken the loan , they would have sold the property and could
have made the repayment to the overseas bank.
Nirav modi bribed the employees at PNB and made his way out for the
biggest banking scam in Indian history .
WHERE IS NIRAV MODI AND MEHUL CHOKSI
Modi and Choksi are wanted by hundreds of investigators after

government owned PNB filed a complained against their companies of
Rs 13600 crore through which fake letters of undertaking and foreign
letters of credit . The opposition alleges that Modi was given permission
to leave the country and also share a photo with PM Modi even though
the government knew about the investigation which was going on .
Both Modi and Choksi left India in January ,2018 , a several days before
the fraud came in front of everyone . Nirav Modi left India to some
other country on 1ST January ,2018 with his brother Nishal ,a Belgian
citizen , his wife Ami , a US citizen . And flew out on January 6th while
his uncle Mehul Choksi and related members had already left on
January 4th . It was later noticed by CBI that all four had gone abroad
and had issued a circular in the first week of february . It was too late
now . The investigation was on and Nirav Modi could be seen in a
group photo of CEOs with PM Narendra Modi at Davos on January 23rd,
2018 .
ACTIONS THAT ARE TAKEN
It is said that if the court announce Modi and Choksi fugitives under
the new ordinance passed .
All the assets of Modi and Choksi in India and Abroad will be liable for
confiscation and can be sold to repay all the debt , even before the trail
begins . Probe Agency said that all the firms of Modi and Choksi have
inflated the value of diamonds ,pearls and jewellery lying in their units
in SEZs( Special Economic Zones ) in Hyderabad and Surat as well as
vaults . The Enforcement Directorate (ED) Is goint to move a special
court this week for “immediate confiscation” of valued assets worth
over Rs 3500 crore of diamond jewellers Mehul Choksi and Nirav Modi
.ED filed an application under section 12 of the ordinance at court in
Mumbai to confiscate their properties in India , United Kingdoms and
the UAE .
The scam amount came out to be Rs 14,356 crore at Punjab National

Bank in February,2108.
Modi’s lawyer Vijay Agarwal declined to comment and Mehul Choksi’s
counsel Sanjay Abbot denied any knowledge of the growth which was
going on . ED valued assets such as luxury cars ,watches and jewellery
worth approx Rs 5,100 crore . First chargesheet against Modi was filed
in May,2018 .Some other investigating agency – Central Bureau Of
Investigation(CBI) has not yet sent an extradiction request against Modi
to the ministry of external affairs , inspite of the existing RCN( Red
Corner notice) .
Mehul Choksi’s request of RCN to Interpol by both agencies is still in

process .

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INTRODUCTION

Nirav Modi ran away by defrauding Punjab National Bank (PNB) of Rs

It is really important to investigate on the whole matter in order to

WHO IS NIRAV MODI

Nirav Deepak Modi (born 27 february 1971) is an Indian businessman .

As of Nirav Modi’s personal life , Nirav Modi was basically born in

HOW A LOAN SYSTEM WORKS

A importer Nirav Modi wants to import pearls or diamonds and sell

PNB transmitted SWIFT(the banking messege service,it is like a messege

Nirav kept on taking loans from foreign branches of Indian banks

REASON WHY NIRAV COULD NOT PAY IT BACK

Nirav never intended to pay it back to the bank , if he had intensions to

HERE’S THE ACTUAL ISSUE

WHERE IS NIRAV MODI AND MEHUL CHOKSI

Modi and Choksi are wanted by hundreds of investigators after

ACTIONS THAT ARE TAKEN

The scam amount came out to be Rs 14,356 crore at Punjab National

Mehul Choksi’s request of RCN to Interpol by both agencies is still in

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