Another Case Of Bank Fraud: Chennai Based Jeweller Cheats Bank Of Rs. 824 Crore

According to a Times of India report, the State Bank of India has reported bank fraud of around Rs 824 crore by jewellery chain Kanishk Gold that has been accused of cheating as many as 14 banks, including the Punjab National Bank.

In January, SBI sought the help of the CBI to investigate jewellery chain Kanishk Gold Pvt Ltd for the loan fraud.

Bhoopesh Kumar Jain and his wife Neeta Jain are the promoters and directors of Kanishk. Its office is registered in T Nagar in Chennai. Bank officials failed to contact the couple who are believed to be residing in Mauritius. The CBI is yet to file an FIR in this regard.

A consortium of 14 public and private sector lenders of which SBI was the lead bank gave loans to Kanishk. SBI charged Kanishk in a letter to the CBI dated January 25, 2018, with “manipulating records, shutting shop overnight.”

The account was first declared fraudulent by SBI on November 11, 2017. Later by January, all other banks announced the account as fraudulent to the RBI. The consortium reported defaulted loans of about Rs 824 crore, but a loss of more than Rs 1,000 crore to the banks as indicated, adding the due interest.

In March 2017, SBI said the jeweller first defaulted payment of interest to eight member banks. Kanishk then stopped payments to all 14 banks by April 2017. The bankers were unable to contact the promoter when it initiated its stock audit on April 5, 2017. Later on May 25, 2017, bank officials visited Kanishk’s corporate office, showroom and factory where they found the facilities were shut with no activity or any stock.

Bhoopesh Jain owner of Kanishk wrote a letter on the same day to the bankers confessing falsification of records and the removal of stocks which are secured as collateral to the lenders. The bank official when visited other showrooms of Kanishk revealed that their doors too had been locked.

“The company shut down as early as May 2017 since it could not cope with the losses.” said a representative from the Madras Jewellers and Diamond Merchants Association.

Banks increased the credit limit and working capital loan limit to the jeweller with the passing of years. In 2008, SBI took over the loan from the ICICI Bank which amounts to Rs 50 crore in working capital loan and Rs 10 crore in term loans which were later converted in March 2011 into multiple banking arrangements with Bank of India and Punjab National Bank.

SBI as a lead bank of the consortium authorized Kanishk to receive a metal gold loan (MGL) in 2012. “Using this option, Kanishk would purchase gold in the form of billions from nominated banks in the consortium or from the open market using credit under MGL or from its current account,” said SBI

Among the banks who lent money to Kanishk are State Bank of India that extended loans of Rs 215 crore, Punjab National Bank Rs 115 crore, Union Bank of India Rs 50 crore, Syndicate Bank Rs 50 crore, IDBI Bank and Bank of India Rs 45 crore each, UCO Bank Rs 40 crore, Tamilnad Mercantile Bank Rs 37 crore, Andhra Bank and Bank of Baroda Rs 30 crore each, ICICI Bank and HDFC Bank Rs 25 crore each, Corporation Bank and Central Bank of India Rs 20 crore each.

In the last couple of months, a series of bank frauds has been exposed of which the biggest was in February where fraudulent transactions of over Rs 11,000 crore was detected by the PNB which later turned into a Rs 13,000 crore scam.