NEW DELHI: India's Enforcement Directorate, a government agency that fights financial crime, will probe the possibility of money laundering in a Rs 11,363 crore fraud case at the state-run Punjab National Bank (PNB), a finance ministry official said on Thursday.
PNB, the country's second-largest state-run lender with assets of USD120 billion, said in a regulatory filing that the fraud benefited "a few select account holders" and that it has reported the matter to law enforcement agencies.
This was an isolated case of a banking fraud and would be investigated by federal agencies, the finance official, who declined to be named as he was not authorised to speak to media, told Reuters.
The branch manager at PNB’s Brady House branch in Mumbai issued fraudulent Letters of Undertaking (LoUs), which were used as collateral to raise money from other banks.
“The quantum of such transactions is $1,771.69 mn approx,” PNB said, adding that the matter has been referred to the CBI.
While the bank did not name anyone in its BSE filing, it sent out a caution notice to 30 other public sector banks on February 12 naming billionaire jewellery designer Nirav Modi and Gitanjali Gems for the fraud.
Also, The Reserve Bank and the Sebi are likely to approach their counterparts in Hong Kong for cooperation in the matter, officials said yesterday.
They also said that the LoUs were mostly used for availing credit at Hong Kong-based branches of some other Indian banks.
An LoU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.
Several other entities which are in the diamond trade, including from South Africa, are also under the lens, they added.
Further, the officials noted that another public sector bank, which is currently under the scanner for business dealings with a South African group, is also being probed as the two cases might be linked.
(With Inputs from ENS and PTI)