18 February 2018
As of March 2017, Indian banks had extended loans and guarantees worth $2,800 million to companies tied to jeweller Nirav Modi and his uncle Mehul Choksi, the tax department said. The exposure is through Letters of Undertaking (LoU) – credit guarantees – issued by Punjab National Bank(PNB) to branches of Indian banks located abroad. Union Bank of India and Axis Bank also have issued LoUs. Nirav Modi-Mehul Choksi firms used these LoUs to raise money to pay their suppliers. When the companies were unable to redeem their previous debts, the bank issued more guarantees to raise money to repay old debts. These guarantees were not recorded in the Bank’s software system but were issued through SWIFT, interbank messaging system, to avoid detection.
Investigating agencies raided 21 locations and seized assets worth $4 million. The Enforcement Directorate, has seized close to $ 1 billion in the form of gold diamonds and jewellery.
A retired and a serving officer of PNB and an executive of Nirav Modi’s company were arrested today. They have been remanded in police custody for 14 days till 3rd march. CBI was seeking to recover missing documents through the three arrested.
Evidence emerged that three companies belonging to Modi and Choksi have been issuing inflated invoices to related companies to reflect higher receivables in their books. It was speculated that Nirav Modi and his uncle had fled the country and are in New York.