IndUS Business Journal

Foreign branches of other Indian banks may be involved in Nirav fraud: PNB

Feb 15, 2018 0

By Quaid Najmi

Mumbai– The Punjab National Bank (PNB) has charged that foreign branches of other Indian banks may also be involved in what has turned out to be the biggest fraud in the country’s banking sector involving diamond trader Nirav Modi.

“There is clear criminal connivance of the group companies of Nirav Modi and Gitanjali Gems with our branch official and also, apparently, with officials of overseas branches of Indian banks,” the PNB said in a detailed note sent to 30 Indian nationalized banks, a private bank and a foreign bank.

A copy of the note is available with IANS.

The PNB virtually accused other banks’ foreign branches of not sharing with it information or documents made available to them by these Indian companies at the time of availing buyers’ credit from them.

“The Buyers’ Credit availed against fraudulent LoU (Letter of Undertaking) was used either to retire import bills or replenish the maturing Buyer’s Credit of some other banks,” the PNB said.

At the same time, the PNB has admitted to the involvement of one of its retired employees and officials of other Indian banks in the modus operandi adopted by diamond companies to dupe them.

The PNB note said “the suspected fraud had been carried out by the perpetrators in collusion with the staff” at its Brady House Branch in Fort in south Mumbai.

The note, dated February 12, was addressed to the Chairmen, Managing Directors and Chief Executive Officers of these banks, signed by the PNB General Manager, International Banking Division, New Delhi.

The PNB said that on examination of SWIFT (international payment network) trail, it was found that a junior level branch official had unauthorizedly and fraudulently issued Letters of Undertakings (LoUs) on behalf of some companies belonging to billionaire diamond trader Nirav Modi to avail buyers’ credit from from foreign branches of various Indian banks.

The companies were: Solar Exports, Stellar Diamonds and Diamond R Us, which only had Current Accounts and did not enjoy the privilege of any fund/non-fund based limits with the branch.

“None of the transactions were routed through the CBS System, thus avoiding early detection of fraudulent activity,” the PNB’s mail said. CBS is the core banking solution system which tracks all transactions.

Worse, the PNB said, the same modus operandi was used by the unidentified PNB official in other diamond majors like Gitanjali Gems Pvt. Ltd, belonging to Nirav Modi’s maternal uncle Mehul Choksi, Gitanjali Gems, Gili India and Nakshatra, for issuing similar LoUs and Foreign Letter of Credit (FLCs).

However, these companies enjoyed credit facilities under the fund-based/non-fund based schemes of PNB.

In the case of FLCs, the bank’s preliminary investigations made the stunning revelation that while issuing FLCs of smaller amounts by SWIFT, the transaction was routed through the CBS but “subsequently, amendments were made in these FLCs by substantially enhancing the amount of FLC and transmitted through SWIFT, without routing these enhancements through CBS,” said the PNB letter.

Later, the official would convey via SWIFT the acceptance of bills for the full amount of the FLC to the overseas negotiating branch, said the PNB, clearly hinting at a possible major exposure of other banks in the fraud.

Further probe revealed that LoU’s were opened in favour of foreign branches of Indian banks for imports of pearls for a period of one year although the Reserve Bank of India (RBI) guidelines stipulate a total period of 90 days from the date of shipment.

“This stipulation was overlooked by the overseas branches of Indian banks, who are also required to follow RBI guidelines,” the PNB note stated.

The entire fraud came to light only after the retirement of the unidentified official and when the companies again approached the Brady House Bank for availing similar LoUs.

When the current PNB officials demanded a 110 percent margin because they were not sanctioned any FB/NFB limits, the companies informed the branch that they had been undertaking such transactions for several years! (IANS)

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‘Strictest’ action taken against Nirav Modi, Congress playing politics: Prasad

Feb 15, 2018 0

New Delhi– The NDA government has taken “strictest” and “fastest” action against jeweller Nirav Modi accused of duping the state-owned Punjab National Bank (PNB) of thousands of crores but the Congress was doing politics over national interest, Union Law Minister Ravi Shankar Prasad said here on Thursday.

Addressing a press conference, Prasad said that the scam started in 2011 when the Congress-led United Progressive Alliance (UPA) government was in power and is the “latest in line in the legacy of corruption and fraudulence left by the Congress Party”.

Ravi Shankar Prasad

He said that the agencies are already taking action against Nirav Modi who fled the country.

“The ED (Enforcement Directorate) and the CBI (Central Bureau of Investigation) are already in action against Nirav Modi. ED has already raided nine properties associated with Nirav Modi, three in Surat, four in Mumbai and two in Delhi. Assets worth Rs 1,300 crore have been seized. Action has been taken to initiate revocation of his passport,” Prasad said.

He added the CBI is also raiding 20 locations associated with him and has seized his Mumbai residence.

He said that the CBI first received a complain from PNB pertaining to Rs 280 crore on January 29 this year and a case was registered on January 31. Lookout notice was issued on February 1.

“The Prime Minister had said in the Lok Sabha that our government has not given any loans that have become NPA (Non Performing Assets). The legacy of NPAs comes from the Congress,” he said, claiming that it was a “well known fact” that Nirav Modi was close to the Nehru-Gandhi family.

“The genesis of the scam was in 2011 and interesting thing to note is that the total income of Geetanjali Jewels almost doubled within a span of 2 years between 2011 and 2013. Geetanjali Jewels — a company owned by Mehul Choski who is also one of the partners along with Nirav Modi in the firms booked for fraud by PNB,” Prasad said.

Prasad also questioned Congress’ right to comment on the incident, claiming that their government allowed liquor baron Vijay Mallya to run away with around Rs 9,000 crore which he had taken as loan from 17 Indian banks.

He also slammed the Congress for referring to Nirav Modi as “chhota Modi”. “Rahul Gandhi is the President of a party not because of his capability but because of his family. What kind of language are they using?”

He denied the incident will taint the Prime Minister’s image, saying PM Modi “has the blessing of the people of India”.

The Congress on Thursday asked the Modi government to come clean on the government’s “failure” to prevent the scam and identify those who helped the alleged kingpin, billionaire jeweller Nirav Modi to flee the country.

It accused the Prime Minister’s Office and other authorities of not taking action even after a complaint was filed in July 2016. (IANS)

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PNB stocks slump for second day, plunges almost 12%

Feb 15, 2018 0

Mumbai– Shares of the Punjab National Bank (PNB) on Thursday continued to drop for a second consecutive day — closing almost 12 per cent lower — after a $1.8 billion fraud was detected in one of its branches in Mumbai.

Its scrips dipped by 11.97 per cent to close at Rs 128.35 per share, lower by Rs 17.45 from the previous close at Rs 145.80.

Stocks of jewellery companies like Gitanjali Gems and PC Jewellers too declined after authorities blamed billionaire diamond trader Nirav Modi for the fraud.

Stocks of Gitanjali Gems, the luxury jewellery brand promoted by Modi’s maternal uncle Mehul Choksi, plunged almost 20 per cent. Scrips of PC Jewellers fell 5.31 per cent on the BSE.

On Wednesday, PNB — the second largest public sector bank in India — informed the stock exchanges through a regulatory filing that it has detected a $1.8 billion fraud in one of its branches in Mumbai.

In the filing, PNB put the quantum of fradulent transactions at $1,771.69 million (around Rs 11,515 crore), which is equivalent to eight times the bank’s net income of about Rs 1,320 crore ($206 million).

The bank’s shares had plunged drastically on Wednesday following the regulatory filing to close lower by 9.81 per cent at the BSE.

The fraud, which includes money-laundering among others, concerns the Firestar Diamonds group in which the Central Bureau of Investigation last week booked Modi, his wife Ami, brother Nishal and uncle Choksi.

On Thursday, the Enforcement Directorate launched a nationwide raid on the offices, showrooms and workshops of Nirav Modi.

Sunil Mehta, MD and CEO of PNB said the company “will not spare anyone” involved in the wrongdoing.

“We are known for clean banking. The fraud started in 2011. We have brought it under the notice of regulatory and law enforcement agencies as soon as we came to know about it. We will not spare anyone involved in the fraudulent practice,” Mehta told reporters on Thursday. (IANS)

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India’s exports fall in January, so do imports

Feb 15, 2018 0

New Delhi– India’s exports plunged by 9.80 per cent to $24.38 billion in January, from $27.03 billion worth of merchandise shipped out in December 2017, official data showed on Thursday.

However, on a year-on-year (Y-o-Y) basis, the exports for January grew by 9.07 per cent to $24.38 billion from $22.35 billion reported for the corresponding month of last year.

“Exports during January 2018 have exhibited positive growth of 9.07 per cent in dollar terms vis-a-vis January 2017. Exports have been on a positive trajectory since August 2016 to January 2018 with a dip of 1.1 per cent in the month of October 2017,” the Commerce Ministry said in a statement.

Exports during January 2018 were valued at $24,383.97 million as compared to $22,356.32 million during January 2017.

The data pointed out that healthy growth in exports was led by “Engineering Goods (15.77 per cent), Petroleum Products (39.5), Gems and Jewellery (0.89), Organic and Inorganic Chemicals (33.6), and Drugs and Pharmaceuticals (8.6)”.

“Non-petroleum and non-gems and jewellery exports in January 2018 were valued at $17,523.24 million as against $16,607.36 million in January 2017, an increase of 5.51 per cent,” the ministry said.

As per the data, country’s imports during the month under review declined by 2.93 per cent to $40.68 billion in January 2018 from $41.91 billion in December 2017.

But on a YoY basis, it increased by 26.10 per cent to $40.68 billion from $32.26 billion reported for the corresponding period of the previous year.

Segment-wise, the data showed that India’s oil imports during January shot up by 42.64 per cent to $11.65 billion, from $8.17 billion in the same month last year.

Non-oil imports during last month stood at $29.02 billion with a growth of 20.49 per cent over $24.08 billion in January 2017.

Consequently, India’s merchandise trade deficit on a YoY basis widened to $16.29 billion during last month as against $9.90 billion in the corresponding period the previous year.

“The marginal growth in exports of gems and jewellery and contraction in sectors such as textiles, yarn and iron ore dampened the expansion of merchandise exports to a three month low in January 2018,” said Aditi Nayar, Principal Economist, ICRA.

“Imports recorded a broad based surge with the exception of a few items such as gold, pulses and project goods. The dip in gold imports was more than offset by higher imports of silver, pearls, precious and semi precious stones.” (IANS)

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With 53% market share, Chinese vendors eclipse Indian smartphone players

Feb 14, 2018 0

New Delhi– Despite the government’s continuous push to help domestic smartphone manufacturers, China-based vendors are thriving and their collective market share has reached a massive 53 per cent in 2017 from 34 percent a year ago, International Data Corporation (IDC) has said.

“The untapped demand in the lower-tier cities remains the key attraction for China-based brands to explore the growth trajectory in India,” said Jaipal Singh, Senior Market Analyst, IDC India.

Their strength in their home market of China and weakening position of local players has helped some of these China-based players to solidify their operations in India,” he added.

Finance Minister Arun Jaitley in the Union Budget announced a hike in customs duty on mobile phones to 20 per cent from 15 per cent.

“Customs duty on import of mobile phone parts will be increased to 20 per cent from the existing 15 per cent. This will boost jobs in the smartphone sector in India,” Jaitley said during his speech.

According to the IDC’s “Quarterly Mobile Phone Tracker”, the Indian smartphone market witnessed a healthy 14 per cent annual growth with a total shipment of 124 million units in 2017 — making it the fastest growing market amongst the top 20 smartphone markets globally.

The market resumed its double-digit growth after a temporary slowdown in 2016 caused by factors such as demonetisation and a shortage of smartphone components.

This contrasts with China, the world’s largest smartphone market that saw its first decline this year, while the US was relatively flat.

When it comes to feature phones, 2017 was an exceptional year for this category as it witnessed a 17 per cent annual growth after declining for three consecutive years.

While feature phones remain relevant to a large consumer base in India, the Indian telecom operator Reliance Jio shipped huge shipments of 4G enabled feature phones taking the leadership position in its maiden quarter in this category, IDC said.

This resulted in a total of 164 million feature phone shipments in 2017 from 140 million a year ago.

“Xiaomi taking a lead over Samsung in the smartphone market and Reliance Jio emerging as the leading feature phone company in India were the two key highlights of the last quarter of 2017,” said Upasana Joshi, Senior Market Analyst, IDC India.(IANS)

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Banking sector stocks depress equity indices

Feb 14, 2018 0

Mumbai– Massive sell-off in banking sector stocks pulled the key Indian equity indices — S&P BSE Sensex and NSE Nifty50 — lower on Wednesday.

According to market observers, heavy selling pressure was witnessed in banking, healthcare and automobile stocks.

At 3.30 p.m. the barometer 30-scrip Sensitive Index (Sensex) of the BSE receded by 144.52 points or 0.42 per cent to 34,155.95 points from Monday’s close. The equity markets were closed on Tuesday.

Similarly, the wider Nifty50 of the National Stock Exchange declined by 38.85 points or 0.37 per cent to 10,500.90 points. (IANS)

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Allahabad Bank posts Rs 1263.79 cr net loss in Q3

Feb 14, 2018 0

Kolkata– State-run Allahabad Bank on Wednesday reported a net loss of Rs.1, 263.79 crore for the quarter ended December 31, 2017, as compared to a net profit of Rs 75.26 crore in the year-ago period.

The net loss was due to a massive increase in provisions to cover rising bad loans.

During the third quarter this fiscal, the bank’s provisions for non-performing assets rose over 150 per cent over last year to Rs 2,044.23 crore as against Rs 795.82 crore for the same period last fiscal.

Asset quality of the lender worsened further in the quarter under review as Gross non-performing assets in absolute term increased by 21.84 per cent to Rs 23,260.81 crore.

Gross NPA as a percentage of total loans rose to 14.38 per cent in the December quarter this fiscal from 12.51 per cent during the same period last fiscal.

In the quarter, net NPA ratio rose to 8.97 per cent from 8.65 per cent in the same period last fiscal.

The bank said that it has provided Rs. 575.91 crore up to December 31, 2017, in respect of nine accounts covered under provisions of the Insolvency and Bankruptcy Code (IBC). (IANS)

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Global macro: Key for Centre to boost Indian infrastructure

Feb 14, 2018 0

By Taponeel Mukherje

Current global macro-economic news has two key trends that stand out: Monetary policy tightening and fiscal policy expansion. Hawkish commentary by global central banks regarding rate hikes and balance sheet reduction has started to hit the newswires with regularity. On the fiscal policy side, tax cuts in the US have made news.

Regardless of the result, the main takeaway is that as monetary policy becomes tighter, fiscal policy might be used to boost consumption. India needs to ensure that investment opportunities in the country remain attractive — relative to global opportunities.

Central bank meetings globally, from the US Federal Reserve to the Bank of England, have admitted to tight labour markets, wage pressure to the upside and inflationary concerns. As rate hikes and balance sheet reductions are priced in, liquidity will be withdrawn from the system. Not only will this lead to asset price volatility, but the market will pay a lot more attention to the quality of assets.

When money supply gets reduced, assets globally will have to compete that much harder to attract capital. India needs to ensure that its assets remain competitive at a global level on a relative basis even as global central bank balance sheets shrink.

The US tax cuts have been a hotly debated topic. Regardless of the long-term ramifications for the economy and for the government debt-to-GDP ratio, the fact of the matter is that corporate tax rates today are extremely competitive in the US compared to other countries.

Germany just reported a public finance surplus for the year 2017, prompting debate around tax cuts to pass on some of the government surplus to the consumer. As countries globally adopt and explore expansionary fiscal policy, it is important for Indian policymakers to ensure that investment opportunities remain attractive at a global level, and the country remains an attractive destination for foreign capital, especially with a view to bridging the infrastructure gap.

India has certain fundamental advantages that stand out. It has an infrastructure deficit and a growing economy that can use newly-created infrastructure. Hence there is natural demand for an asset in a large economy such as India. Essentially, India has both the need and the required market size to deploy large pools of global capital. But given the “competition” for the global capital pool, the country needs to build on the fundamental strengths to attract the necessary capital.

Any investment at a basic level has a “financial” attractiveness and a “regulatory” attractiveness. As global yields head higher and tax breaks kick in, Indian assets will have to compete even harder on the “financial” aspect. However, this is the time to push ahead with changes that can help boost the “regulatory” attractiveness of Indian assets.

While the bankruptcy resolution mechanism under the Insolvency and Bankruptcy Code (IBC) has been a step in the right direction, greater clarity is needed around Public Private Partnership (PPP) agreements and irrevocability of offtake agreements such as Power Purchase Agreements (PPAs) is essential to provide Indian infrastructure investments a regulatory boost.

PPPs have been used to deliver valuable projects in India, but in many instances they have been mired in problems. We think clarity at the beginning and a more detailed analysis and allocation of risk is essential to ensure that PPPs are successful. The PPP model needs attention because a large part of much-needed infrastructure will have to come through this route. Irrevocability of offtake agreements from infrastructure projects is non-negotiable.

For investors to have faith in the contract to make capital-intensive, long-dated investments, offtake agreements such as PPAs must be respected and honoured. “Bankability” of infrastructure projects can only go up when global investors have greater faith in contract enforceability in the country.

It is thus important for policymakers and the industry in India to be cognizant of global changes and macro-economic moves. Nations always have, and will rightly continue to, compete for much needed capital. India is a compelling investment opportunity, but must build on its inherent strengths to attract the best of global capital. (IANS)

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Nestle India’s net profit up 22% in 2017

Feb 14, 2018 0

Mumbai– Nestle India on Wednesday reported a 22.35 per cent rise in its net profit during 2017.

The company in a regulatory filing to the BSE said that its net profit for 2017 rose to Rs 1,225.19 crore from Rs 1,001.36 crore reported in 2016.

According to the filing, the total income of the company during year stood at Rs 10,369.10 crore, up 7.73 per cent from Rs 9,625.47 crore earned in 2016.

“Total sales and domestic sales for the year increased by 7.7 per cent and 8.2 per cent, respectively. These growth rates are adversely impacted due to lower reported sales by the change in structure of indirect taxes and reduction in realisations to pass on the GST benefits,” the company said in a statement.

“On a comparable basis the domestic sales growth is ‘estimated’ at 11.8 per cent due to increase in volumes including rebuild of Maggi noodles, supplemented by better underlying realisations,” it said.

On a quarterly basis, the net profit rose nearly 60 per cent to Rs 311.83 crore in Q4, 2017 from Rs 195.41 crore during the corresponding period of 2016.

The total income in Q4, 2017 stood at Rs 2,652.55 crore, up 10.45 per cent from Rs 2,401.56 crore earned in Q4, 2016.

“The board of directors have recommended a final dividend of Rs 23.00 per equity share amounting to Rs 2,217.6 million (Rs 221.76 crore) for the year 2017,” the company said.(IANS)

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India reassures aid for Iraq rebuilding process

Feb 14, 2018 0

New Delhi– India on Wednesday assured its commitment to help war-torn Iraq in its rebuilding process while complimenting the nation for its victory over the Islamic State (IS) terror outfit.

“India responded to the need for humanitarian assistance even while the war was at its peak in Iraq: among other things, in August 2016, we proposed to reconstruct the hospital in Karbala,” Minister of State for External Affairs M.J. Akbar said while speaking at the International Conference for Reconstruction of Iraq in Kuwait.

“India responded to the urgent needs of Iraq for relief and economic reconstruction both directly and as part of international efforts under UN auspices,” Akbar said, adding that on the UN Secretary General’s urgent appeal, India contributed $20 million for assistance to the Iraqi people.

He said that under this pledge, India provided milk food supplies through World Food Programme, and along with it, provided assistance to Iraqi school children and Iraqi refugees in Syria. It also trained Iraqi Foreign Service officers in diplomacy, and other Iraqi officials in information technology.

“In addition, India contributed $10 million towards the International Reconstruction Fund Facility for Iraq for investments, reconstruction and development in Iraq.”

Akbar said that the conference offered an opportunity for the world to congratulate the people and government of Iraq for their historic victory over a “vicious contemporary menace” of IS, and its allies, “who used a volatile fusion of false ideology and barbaric terrorism to become a regional epicentre of upheaval and violence against innocent civilians and legitimate government”.

“We must win both the battle and the argument,” he said, adding the answer to terrorism lies in security, prosperity and reaffirmation of sovereignty and “the three sustain each other; any indifference or complacency towards any side of this triangle will make the rehabilitation process infructuous”.

On behalf of India, Akbar also also complimented all those nations which, directly or indirectly, came together to defeat the regressive and extremist forces that spread their tentacles far beyond Iraq.

Terming terrorism, fundamentalism and extremism the scourge of the 21st century, he said: “We must be united in our defence of pluralism and civilisation without ifs and buts. There is no ‘good terrorism’ or ‘bad terrorism’: all terror is an unmitigated evil. India has always supported a free, democratic, pluralistic, federal and unified Iraq.”

Akbar also appealed to the international community for early adoption of the India-initiated Comprehensive Convention on International Terrorism (CCIT) in the UN.

He said India continued to assist Iraq in capacity building through training of Iraqi officials under the Indian Technical and Economic Cooperation programme and to broadbase services, also established a Consulate General office in Erbil.

Welcoming Baghdad’s announcement that it was now open for investment, he said India would play its part with project-specific proposals.

“We support the important role assigned to private sector investors in rebuilding of the terrorist-affected areas in Iraq,” Akbar said, adding India was willing to play a substantive role in major projects in petrochemicals, health, education, infrastructure and other sectors. (IANS)

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