The Indian state-owned Punjab National Bank, which is currently embroiled in a 114 billion rupee (US$1.77 billion) fraud case, the worst in India’s corporate history, has revealed the modus operandi of the fraudsters and warned other banks.
The bank has also alleged that overseas branches of other Indian banks had overlooked Reserve Bank of India (RBI) norms, thereby hinting that the scam is far more widespread.
In a letter sent to various banks, PNB said that as per its preliminary investigation, the perpetrators carried out the suspected fraud in collusion with staff at one of its branches in Mumbai, reports Press Trust of India.
Through the SWIFT trail, the bank found that one junior-level official had fraudulently, and without authorization, issued letters of undertaking (LoUs) on behalf of some companies belonging to Nirav Modi Group.
The companies were maintaining only current accounts with the branch and none of the transactions were routed though the centralized banking system, the letter added.
A similar modus operandi was used by the same official for companies belonging to Gitanjali Gems, promoted by Mehul Choksi.
The fraud came to light after the involved official retired and the same companies again approached the branch for availing LoUs.
PNB said RBI norms were overlooked by overseas branches of other Indian banks and alleged connivance of group companies of Nirav Modi and Gitanjali Gems with its own official and also apparently of others working in foreign branches of Indian banks.
SEBI to probe disclosure lapses
Meanwhile the Securities and Exchange Board of India (SEBI) is likely to probe possible disclosure lapses by banks and other listed companies, including several jewelry firms, that have come under the scanner in connection with the PNB fraud, reports Business Standard.
It will analyze trading data of these companies and their top officials, some of whom are already under suspicion of insider trading and other violations, the daily added.