But these LoUs were rolled over beyond the expiry date and used to leverage one of the biggest frauds in Indian banking history.
The fair market value of the iconic Rhythm House, acquired by Modi's firm Firestar Diamond International Pvt Ltd in March 2017, is pegged at Rs 32 crore, the same price at which Modi acquired it past year from Mehmood Curmally.
Tuesday's disclosure takes PNB's overall exposure in the still unravelling fraud case to well over the $2 billion mark.
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Since then, the professor used a voice synthesiser which enabled him to control a computer screen using his cheek for data entry. In a statement , his children Lucy, Robert and Tim said: "We are deeply saddened that our beloved father passed away today".
The "amount of Rs 942 crore was the regular limit sanctioned to Gitanjali Group under consortium lending, and was standard credit exposure at the time of detection of the fraud". This buyer's credit is provided on the basis of an LoU, which is akin to a guarantee and is issued by the importer's local bank. LOUs are issued only after a bank ensures that the customer has sufficient funds or assets to recover the amount of foreign exchange withdrawn overseas, and it comes with a credit limit and a charge is levied for the service.
Importers prefer taking loans based on LoUs as they are denominated in foreign currency and are cheaper than rupee credit.
However, the Reserve Bank has allowed banks to issue letters of credit and bank guarantee for trade credits for imports into India subject to compliance with the relevant provisions. Recent reports also highlight that, billionaire Modi has refused to join the CBI investigation related to the case, citing that he has a business overseas.
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On the other hand, it is hell bent on passing the bill without a proper scrutiny. These will now go to the Rajya Sabha where the Opposition is in majority.
Fugitive jeweller Nirav Modi obtained his first fraudulent guarantee from PNB's Brady House branch in Mumbai on March 10, 2011 and managed to get 1,212 more such guarantees over the next 74 months, Finance Minister Arun Jaitley said.
Though Modi has not yet been arrested, India's External Affairs Ministry has revoked his passport as well as Choksi's for their involvement in the scam. CBI and ED are leading a multi agency probe into the fraud.
Ajay Sahai, Director General of exporters' body Fieo said that the RBI decision should have very little impact on trade as bank guarantee and letter of credit continue to be available. "CBI said this in an application for incorporating Section 409 of the IPC in the second FIR pertaining to Choksi controlled firms".
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