Conspiracy theories abound in this age of social media. As do some wonderfully politically incorrect jokes revolving around the Modi name and foreign travel. The Nirav Modi scam simply provided fuel to an already merrily burning fire of scams and defaulters, and the jokes and memes and “theories” came thick and fast.
As do some wonderfully politically incorrect jokes revolving around the Modi name and foreign travel. The Nirav Modi scam simply provided fuel to an already merrily burning fire of scams and defaulters, and the jokes and memes and “theories” came thick and fast.
It’s all very funny, no doubt, but it’s also dark humour. It’s the laughter of a nation that’s becoming accustomed to financial fraud on a large scale and knows nothing much will be done about it. Nothing, that is, apart from squeezing the average taxpayer even more. Our history is replete with examples, but let’s just look at the most recent—the unfolding saga of how jewellery designer Nirav Modi managed to play a public sector bank to the tune of Rs 12,000-plus crore. (That amount is increasing almost on a daily basis, as more details come to light.)
For the very few who have not been following the scam, this is what happened. Diamond jewellery designer and trader Nirav Modi took loans from foreign banks (or foreign branches of Indian banks) on the strength of letters of undertaking (LoUs) from his bank, Punjab National Bank (PNB). Typically, such letters work as the issuing bank’s guarantee of the borrower’s soundness and ability to pay. Except, it now appears, most of these letters were not sanctioned by PNB’s bosses; someone low on the pecking order at PNB used the inter-bank messaging system SWIFT to send out messages that the letters had been issued. Since these messages are seen as “official”, the receiving banks went ahead to issue loans. Modi, meanwhile, began taking larger loans, sometimes using one loan to pay offan older one. It was a classic Ponzi scheme that ended like most of these schemes: with a crash.
This story is from the March 2018 - June 2018 edition of Fortune India.
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This story is from the March 2018 - June 2018 edition of Fortune India.
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