Jewellery chain Kanishk Gold defrauds 14 banks to tune of Rs 824.15 crore

CHENNAI: In yet another bank fraud , State Bank of India has requested the help of the CBI in January to investigate jewellery chain Kanishk Gold Pvt Ltd for loan fraud to the tune of Rs 824.15 crore.
Kanish, which has a registered office in T Nagar in Chennai, is owned by promoters and directors Bhoopesh Kumar Jain and his wife Neeta Jain. Bankers said they were unable to contact the couple.The CBI on Wednesday conducted searches at the official and residential premises of accused persons and Kanishk offices at various places in Chennai. CBI has registered a case. Sources said, "The accused people have been contacted and have been asked to join investigation."

SBI was the lead bank in a consortium of 14 public and private sector lenders to give loans to Kanishk. In a letter dated January 25, 2018 to the CBI, SBI charged Kanishk with "manipulating records, shutting shop overnight."
While the principle loaned is about Rs 824 crore, adding the interest due would indicate a loss of more than Rs 1,000 crore to the banks.
SBI was the first to declare the account fraudulent to the RBI on November 11, 2017. By January, all other members had declared the account as fraudulent to the regulator.
SBI said the jeweller first defaulted in March 2017 in interest payments to eight member banks. By April 2017, Kanishk stopped payments to all 14 banks. The bankers were unable to contact the promoter when it initiated its stock audit on April 5, 2017.
On May 25 2017, when bankers visited Kanishk's corporate office, factory and showroom -- the facilities were shut with no activity and stock.
On the same day, Bhoopesh Jain wrote a letter to his bankers admitting falsification of records and removal of stocks -- secured as collateral to the lenders. Subsequent visits by the bankers to the other showrooms of the jeweller revealed that they had also been locked.
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A representative from the Madras Jewellers and Diamond Merchants Association said, "The company shut down as early as May 2017 since it couldn't cope with the losses."
SBI's letter shows that the loans to Kanishk Gold date from 2007. With the passage of years, the banks increased the credit limit and working capital loan limit to Kanishk Gold. In 2008, SBI took over the loans from ICICI Bank -- at that point -- they amounted to Rs 50 crore in working capital loan and Rs 10 crore in term loans. In March 2011, this was converted into a multiple banking arrangement with Punjab National Bank and Bank of India.
In 2012, the consortium with SBI as lead bank, sanctioned granting of metal gold loan (MGL) to Kanishk. "Using this option, Kanishk would purchase gold in the form of bullions from nominated banks in the consortium or from the open market using credit under MGL or from its current account," said SBI
State Bank of India extended loans to the tune of Rs 215 crore, Punjab National Bank Rs 115 crore, Union Bank of India Rs 50 crore, Syndicate Bank Rs 50 crore, Bank of India Rs 45 crore, IDBI Bank Rs 45 crore, UCO Bank Rs 40 crore Tamilnad Mercantile Bank Rs 37 crore, Andhra Bank Rs 30 crore, Bank of Baroda Rs 30 crore, HDFC Bank Rs 25 crore, ICICI Bank Rs 25 crore, Central Bank of India Rs 20 crore and Corporation Bank Rs 20 crore.
In an interview to Times Now, R Soundarajan, AGM, Corporation Bank, said he was aware of the issue. "SBI would be in a better position to answer questions. Our exposure to Kanishk is small, compared to other banks. We have extended a working capital loan of about Rs 20 crore," said the AGM of Corporation Bank.
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GD Chandrasekhar, general manager, SBI, said the bank would respond when it has further information.
Audits of Kanishk's financials were done by Ajay Kumar Jain partner at Ajay & Co Chartered Accountants and Sumit Kedia, partner, Lunawath & Associates.