New Delhi: The Central Bureau of Investigation (CBI) has sought from the chief vigilance officers of five banks the details of financial transactions in the Nostro accounts of Punjab National Bank (PNB) on the basis of 293 fraudulent Letters of Undertaking issued by it to jewellers Nirav Modi and his maternal uncle Mehul Choksi, officials said.
The overseas branches Canara Bank, Bank of India, State Bank of India, Allahabad Bank and Axis Bank had credited over Rs 11,400 crore into the Nostro account of PNB on the basis of the guarantees (LoUs) given by to Nirav Modi and Mehul Choksi, they said.
The Nostro account refers to an account that a bank holds in a foreign currency in another bank overseas to enable foreign trade by its clients.
The CBI has now written to these five banks, having branches in Antwerp, Frankfurt, Mauritius, Hong Kong and Bahrain — to provide details of all such transactions to dig out a clear money trail of Rs 11,400 crore.
The fraud, by far the biggest ever detected by an Indian bank, comes to light at a time when lenders - especially state-run banks - are hobbled by $147 billion in soured loans on their books, a problem that has slowed lending and hurt the economy.
On January 29, PNB filed a criminal complaint with India's central investigative agency against three companies and four people, including billionaire jeweller Nirav Modi and his uncle Mehul Choksi, the managing director of Gitanjali Gems, saying they had defrauded PNB and caused a loss of RS 280 crore.
In a regulatory filing on February 14, the bank updated the sum involved in the fraud to Rs 11,400 crore ($1.77 billion), which it said was determined after further investigation.
The bank alleges that two junior employees at its Brady House branch in Mumbai colluded with companies belonging to Modi and Choksi, and issued fraudulent "letters of undertaking", or LoUs, without asking for any margin money as security, even though the firms did not have any pre-approved credit limit.
The firms, PNB says, raised short-term credit from overseas branches of other Indian banks based on these LoUs, and in some instances fraudulent foreign letters of credit (FLCs) in favour of foreign suppliers.
(With agency inputs)