LAST_UPDATEWed, 18 Jul 2018 11pm

Billionaire At Centre Of India's Big Bank Fraud Tells Staff He Can't Pay Them

Nirav ModiNirav Modi

NEW DELHI -- A billionaire jeweller and diamond trader at the centre of India's biggest banking scandal has told his staff to find new jobs as he cannot pay them due to his financial troubles.

"The near future is uncertain," Nirav Modi, whose companies are being investigated in an alleged fraud of US$1.8 billion at Punjabi National Bank (PNB), told employees in an email, according to the Hindustan Times newspaper.

India's Central Bureau of Investigation (CBI) has arrested a senior manger in connection with the scam in which the companies related to Modi and his uncle Mehul Choksi, owner of top Indian jewelry firm Gitanjali Gems, fraudulently secured bank guarantees to receive loans from Indian banks.

Rajesh Jindal, a senior PNB official who served as head of the bank's Brady House branch in Mumbai between 2009 and 2011 was take into custody, taking the number of arrested bank staff to six.

According to local media, the practice of issuing Letters of Undertaking (LOUs) to Nirav Modi's businesses without sanctioned limits started during Jindal's tenure at the branch.

The LOUs were used to receive loans from several overseas branches of Indian banks. Some reports suggest the size of the scam could be bigger than the reported 114 billion rupees (about US$1.8 billion) and many banks are likely to suffer losses due to their exposure to the loans.

A lawyer representing Modi said the billionaire, whose brand was endorsed by Bollywood star Priyanka Chopra, had done nothing wrong.

"There is nothing that proves Nirav Modi is guilty," Vijay Aggarwal was quoted as saying by the Times of India newspaper.

The Indian government has revoked the passports of Modi and Choksi, who are believed to have left India before the alleged scam surfaced.

Their businesses have been raided and several assets seized at various locations in India. Modi was born in India but grew up in the Belgian diamond hub of Antwerp. The diamond merchant, who has businesses in places such as Macau, Beijing, New York and London, has written to PNB that the ability of his companies to repay their loans has been harmed the investigation.

"The erroneously cited liability resulted in a media frenzy which led to immediate search and seizure of operations, and which in turn resulted in Firestar International and Firestar Diamond International effectively ceasing to be going concerns. This, thereby, jeopardised our ability to discharge the dues of the group to the banks," Modi told the bank last week, according to local reports.