PNB Crisis – Gem of a Scam among Scams of Gem
On 14 th of February, the Punjab National Bank, India's second-largest state-run lender, said it had detected "some fraudulent and unauthorized" transactions amounting to around Rs 11,360 crore at a branch in Mumbai. The fraud involved unsecured loans that were given to Nirav Modi, a diamond and jewellery merchant, and his associates. This piece is an attempt to explain the issue in the simplest possible way and is my personal interpretation. What is a bank : A bank as ‘a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets’ ( Wikipedia, sic ). Hence, in a banking system a group or network of institutions provides financial services to people. These institutions by managing deposits, operating payment systems, and providing loans, enables trade and money management. It is evident from the fact that all the major financial centers in world (lik...