As details of the Nirav Modi fraud emerged, I was vividly reminded of a conversation that I once had with my boss, a seasoned and experienced banker.
This was in the early 1990s and as head of the project and corporate finance division, I was seeking approval for a complex long-term project finance proposal. After going through the credit appraisal, he said, “This is an excellent analysis of the project, and of the promoters’ ability to pay—but have you assessed their intent?”
And then he went on to say something I would never forget. “You must, of course, do your due diligence on the project and promoter. But before you make a final decision on whether to lend or not, sit down with your borrowers and look them in the eyes. And then make an assessment of whether you would trust them with your own money. If the answer is yes, go ahead; if not, don’t. And remember sometimes the richest people can be cheats and the poorest can be the most honourable.”
Prophetic words indeed! They stood me in good stead throughout my banking career, and, I believe, constitute the best possible guidance for anyone in the financial services world.
In the current glittering Modi-Choksi saga that has captured the attention of the nation, this advice would have served bankers in PNB and their correspondent banks well.
The facts of the Rs 280 crore fraud are clearly articulated in the FIR filed by PNB. Two officers in the foreign exchange department of PNB’s corporate branch in Fort, Mumbai, Gokulnath Shetty (who retired in May 2017) and Manoj Kharat, are alleged to have issued eight letters of Undertaking (LoUs) via SWIFT, in favour of Nirav Modi’s group of companies, for the import of pearls from Hong Kong, totalling $44.22 million, in February 2017, without any collateral and without recording these in the bank’s core banking system.
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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