As probe into the PNB fraud case becomes more aggressive, billionaire Jeweller Nirav Modi’s flagship company Firestar Diamond Inc has filed for bankruptcy in the Unites states.
The billionaire is at the centre of the India’s biggest banking scam that hit the second largest lender of the country, the Punjab National bank and was estimated at Rs. 11,400; only to be revised by the bank to stand at Rs. 12,700 crore.
Firestar Diamond Inc listed assets and liabilities in the range of $50 million to $100 million, according to a court filing in the Southern District of New York on Monday. The company is a unit of Firestar International and had $2.3 billion in sales as of March 2017, as per the estimates previously provided by the company.
The extent of the fraud has raised apprehensions about the potential for similar cases across the banking sector, following which the Finance Ministry has set a fifteen day deadline for the PSBs to take action to reform their handling of operational and technological risks. The lenders have also been instructed to thoroughly examine any bad loans worth more than 500 million rupees for risks of potential fraud.
Experts said that if any more frauds are identified, the government’s directive for stronger supervision may cost the banks in the short-term, even though it will be beneficial in the long run.
“The oversight in the banking system is obviously not good,” said Yuvraj Choudhary, an analyst at brokerage Anand Rathi. “This could lead to uncovering of more potential scams. We can expect bottom-lines to be hit in the coming quarters
Meanwhile, a CBI source revealed that current and former officials at PNB are being questioned, including former managing director Usha Ananthasubramanian, who is now the head of the state-run Allahabad Bank, as well as officials from other banks that lent to companies tied to Mehul Choksi.