A casual question about the Nirav Modi episode recently nudged me to revisit the notes I had compiled seven years ago—notes that captured the anatomy of the massive fraud unearthed at Punjab National Bank in January 2018. I had used this case extensively in my corporate governance lectures as a telling example of governance failure and systemic vulnerabilities. This article is an update—on both the episode itself and the elusive quest to bring Nirav Modi to justice.
The Sparkle and the Story: Who Is Nirav Modi?
Nirav Modi hails from the Palanpuri Jain community, a group that has carved a dominant niche for itself in the global diamond trade, particularly in Antwerp, Belgium. Though born in Palanpur, Gujarat, Modi was raised in Antwerp, where his family had been engaged in the diamond business for generations.
In 2010, aged 39, he launched his namesake luxury diamond jewelry brand, “Nirav Modi,” with ambitions to rival the storied European houses. By 2015, his company, Firestar, had crossed $1.5 billion in reported revenues and built a glittering global retail footprint—with 17 boutiques in cities like New York, London, and Hong Kong.
His high-end, limited-edition pieces—renowned for their craftsmanship and exclusivity—graced red carpets and celebrity necklines, becoming symbols of Indian luxury on the international stage. In just five years, Nirav Modi had achieved what no Indian brand had before: built a world-class luxury label from ground up.
But behind the sparkle lay a darker truth—one that would eventually unravel a billion-dollar banking fraud and plunge one of India’s oldest public sector banks into crisis.
Financing the Dream: How Was the Growth Funded?
To support the rapid expansion of its retail stores, Nirav Modi’s companies needed large sums of money to produce and display jewelry in their boutiques. This funding was arranged through Letters of Undertaking (LoUs) issued by Punjab National Bank (PNB). An LoU is a type of guarantee provided by a bank, which assures a foreign bank that the bank’s customer will repay the loan. Based on this guarantee, the customer can get short-term credit from a foreign bank without making an upfront payment.
However, there was a regulatory restriction in place: credit was allowed for a maximum of 90 days for importing raw materials for making jewelry—except for pearls, which were given a longer credit period of one year. To benefit from this exception, Nirav Modi’s companies falsely claimed that they were importing pearls. The subterfuge allowed them to get extended credit that they were otherwise not eligible for.
The money was lent by foreign banks or international branches of Indian banks, against the LoUs issued by PNB in favor of Modi’s companies. PNB’s system had a critical flaw: the LoUs issued were not routed through the bank’s core banking system (CBS)—which records all transactions and monitors how much money a bank has lent to each customer. As a result, the exposure of PNB to Nirav Modi’s companies remained unchecked. The bank’s internal system never flagged that Nirav Modi’s companies had borrowed far beyond acceptable limits.
The Cracks Beneath: The Bank’s Exposure
This significant oversight came to light in 2018, when Nirav Modi’s companies approached PNB for fresh LoUs. The request landed on the desk of an employee who hadn’t handled the account before. While checking the request, the employee realized that there was no official record of PNB having ever granted such a facility to these companies in the CBS. That raised a red flag.
A deeper investigation followed, which revealed a shocking situation: PNB’s extant financial exposure to Nirav Modi’s companies was about $2 billion —far more than what the bank would normally allow for such a customer.
When Nirav Modi learned about the discovery, he reportedly pleaded with the bank to keep things quiet for a while, thereby giving him time to repay the money. He warned that if the information became public, his companies would collapse, making it impossible for him to repay the loans.
PNB, however, did not accede to his request. On January 29, 2018, the bank filed a complaint with the Central Bureau of Investigation (CBI) and publicly disclosed the entire episode.
The Long Trail of Deceit: The Outcome of the Investigations
Multiple agencies, including international ones, were involved in investigating what prima facie appeared to be fraudulent transactions. While in the early years, the Letters of Undertaking (LoUs) were used for legitimate business purposes, a disturbing pattern of misuse of LoUs emerged in the later years. No goods were imported or exported against them. The funds raised through these LoUs were funneled through a web of dummy companies and never repaid, leaving Punjab National Bank to bear the loss. Over the six-year period, out of more than 1,200 LoUs issued, only 53 were found to have been used for genuine business needs. As each LoU was for $20 million, the total money routed through the LoUs over six years was a whopping $24 billion. Of this, just about $1 billion was used for genuine business transactions.
The fraud continued undetected for six years because of collusion between Nirav Modi’s companies and corrupt bank officials, and because critical internal controls were missing.
The Fugitive Tycoon: Where Is Nirav Modi Now?
Nirav Modi fled India before formal charges could be filed. He was arrested in the United Kingdom in March 2019 and has been in prison there ever since. As of June 2025, he has exhausted all legal avenues to appeal his extradition to India. However, a “confidential impediment” still blocks the extradition—believed to stem from an asylum application he has filed.
The Tragedy of Talent: Could It Have Been Different?
It’s hard not to reflect on the tragedy of wasted potential.
Nirav Modi had achieved what no Indian had in the luxury business. In an industry long dominated by international giants, he built a brand that was globally recognized. In just a few years, his companies were profitable, admired, and expanding rapidly. He had carved a place for himself in a world that is notoriously difficult to enter.
Why, then, did he choose the path of fraud—a path that was always likely to end in ruin? Was it unbridled greed for money that outpaced the distinct possibility of entrepreneurial success?
Equally baffling is PNB’s decision to reject Modi’s plea for time to repay the money owed to the bank. When the fraud was exposed, he reportedly asked the bank to hold back any action, fearing that public disclosure would destroy the last hope of salvaging his companies and repaying the debt. PNB, however, proceeded to file a complaint and made the matter public. While some of Modi’s domestic and global assets were eventually seized and liquidated, the recovery was only a fraction of what he owed.
What remains is the shadow of what could have been—a story of enterprise, promise, and fame, all undone by choices that were tragically short-sighted and imperfect.