A worldwide search is under way for a billionaire Indian jeweller accused of cheating the state-owned Punjab National Bank (PNB) out of nearly $1.8bn.
Nirav Modi, a third-generation jewellery tycoon whose clients have included Kate Winslet and Priyanka Chopra, is alleged to have colluded with bank employees to obtain huge unsecured loans over a seven-year period, according to a complaint filed by PNB.
The borrowed funds, amounting to nearly one-third of PNB’s market value, caused shares in the bank to plunge this week. Some of the loans were used to replenish lines of credit with other lenders, according to PNB, contributing to fears the alleged scam could have wider ramifications for India’s ailing banking sector.
Modi, one of India’s richest men with an estimated fortune of about $1.73bn (£1.23bn), is thought to have left India on 1 January. His wife, brother and uncle, all involved in the business, reportedly flew out the same week. Authorities have applied to have Modi’s passport cancelled.
Interpol issued a diffusion notice on Friday seeking information on his whereabouts. New Delhi Television reported on Friday that Modi and his wife were staying in a family penthouse overlooking Central Park in New York.
The scandal took on a political dimension on Thursday when photographs emerged showing Modi seated in a group with the Indian prime minister, Narendra Modi – no relation – as part of the country’s delegation to the World Economic Forum in Davos.
Days after the photographs were taken, India’s Central Bureau of Investigation registered its first criminal case against the jeweller, initially alleging a scam worth about $43m. This week it revised the estimate upwards by more than $1.7bn.
The cabinet minister Ravi Shankar Prasad said Nirav Modi was not part of the prime minister’s delegation at the global gathering in Switzerland. “He went to Davos on his own. He joined a photograph of Indian businessmen. In no way does it show any connection,” Prasad told reporters.
The Enforcement Directorate raided 17 properties linked to the family on Thursday including several high-end jewellery showrooms in Mumbai and Delhi. The tax authority claims to have seized assets worth about half the value of the alleged fraud.
The first loans were allegedly drawn in 2011 and continued until last month when Modi’s companies approached PNB seeking fresh funds. But a bank official who allegedly colluded with Modi had retired, and staff queried why the money was being sought without collateral. It triggered an investigation and last month’s complaint to the Central Bureau of Investigation.
The Indian banking sector is struggling under the weight of bad loans valued as high as $150bn. The uncertainty threatens the ability of banks to fuel the growth required to provide jobs for the estimated 1 million Indians who join the workforce each month.
The government recently announced it would inject $32bn into the sector to help banks clean up their books, but analysts have questioned whether the money is enough without reforming the banks themselves.
Indian authorities are currently engaged in proceedings in the UK to extradite another billionaire, the F1 tycoon Vijay Mallya, who is accused of defaulting on loans from state-owned banks worth about $1.4bn.