Know how Mehul Choksi orchestrated India’s Rs 13,500 crore bank scam

Fugitive diamond tycoon Mehul Choksi, once celebrated as a jeweller to the rich and famous, stands accused of masterminding one of India’s largest banking frauds- the Rs 13,500 crore Punjab National Bank (PNB) scam. The case, which shook India’s financial system in 2018, exposed deep-rooted loopholes in the country’s banking oversight.

Choksi, along with his nephew Nirav Modi, allegedly exploited PNB’s internal systems to obtain fraudulent Letters of Undertaking (LoUs) from the bank’s Brady House branch in Mumbai. These LoUs functioned as bank guarantees, allowing the duo’s companies, including Gitanjali Gems and Firestar International, to secure credit from foreign banks without offering any real collateral.

The Great PNB Heist:

Between 2011 and 2017, Choksi’s firms availed thousands of crores in foreign credit through this method. Rogue bank officials allegedly bypassed the core banking system to issue these LoUs manually, ensuring that the fraudulent transactions went undetected for years. When the scam finally came to light in early 2018, PNB reported massive losses, triggering widespread outrage and reforms in India’s banking protocols.

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Just weeks before the fraud was uncovered, Choksi fled India in January 2018, eventually obtaining citizenship in Antigua and Barbuda under its investment programme. His nephew Nirav Modi escaped to London, where he remains in custody facing extradition proceedings. Choksi, meanwhile, faced multiple legal battles across the Caribbean and Europe, claiming innocence and alleging political persecution.

The Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) have since filed several charge sheets against Choksi, accusing him of money laundering, criminal conspiracy, and cheating. The agencies allege that he diverted funds to shell companies and used them to acquire assets abroad.

With a Belgian court recently approving Choksi’s extradition, Indian authorities have renewed hopes of bringing the fugitive back to face justice. The development marks a major step forward in a long-drawn legal pursuit that began over seven years ago.

For many, the case stands as a stark reminder of how unchecked power and weak financial controls enabled one of the biggest banking frauds in Indian history- a scam that blurred the line between glamour and greed.