Top Indian private banks under scanner in bank fraud probe

Tyler Owen
March 7, 2018

A consortium of 31 banks had extended ₹5,280 crore working capital facility to Choksi's companies.

Mumbai: A top official of the Gitanjali group was arrested by the CBI after he was detained at the Mumbai airport earlier Tuesday morning and taken away for questioning in the Punjab National Bank fraud case.

Meanwhile, the CBI told a Mumbai court on Monday that violation of norms for issuance of Letters of Undertaking (LoUs) to benefit billionaire jeweller Nirav Modi and his uncle Mehul Choksi had been going on since 2010. The SFIO has summoned ICICI Bank Chief Chanda Kochhar and Axis Bank's Shikha Sharma for interrogation in connection with the big bank scam. But, in case of a default, the bank that has issued the LoU has to pay the liability to the credit giving bank along with the accruing the interest.

Bombay Stock Exchange (BSE) has sought clarifications from both banks about the news, but neither had responded.

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In a separate release regarding Indian Overseas Bank, the RBI said that a fraud was detected in one of the branches of IOB, resulting in the regulator imposing a penalty of Rs 2 crore on the government-owned bank.

As part of the investigation, the SFIO has issued summons to heads of over 30 banks that have exposure to companies of diamond traders Nirav Modi and Mehul Choksi. "We would like to question both of them".

In a response to the report, ICICI Bank has said the bank has "no exposure to the Nirav Modi group of companies". We are working capital lenders to the Gitanjali group of companies along with several other banks in the consortium... The investigators will start with state-run PNB on Wednesday and will subsequently cover the other lenders, the people said, asking not to be identified as the details are private.

The jewelers are accused of getting letters of undertaking (LoUs) based on fraudulent claims from PNB, which bank officials did not enter in their internal software to avoid scrutiny.

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