Fri | Jan 18, 2019

Indian bank cheated of US$1.8b in complex fraud

Published:Friday | February 16, 2018 | 12:00 AM

Indian investigators are probing a US$1.8-billion bank fraud, an official said Thursday, with a wealthy jeweller reportedly using fake bank documents to obtain overseas loans.

State-owned Punjab National Bank said in a Wednesday statement that the "fraudulent and unauthorised transactions" had been discovered in January in a single Mumbai bank branch "for the benefit of a few select account holders with their apparent connivance."

India's Central Bureau of Investigation began its probe soon after the bank made the discovery, said Abhishek Dayal, an agency spokesman.

Numerous Indian media outlets have linked the scam to billionaire jeweller Nirav Modi.

Authorities have not publicly accused Modi in the US$1.8-billion fraud but say he is under investigation for allegedly cheating Punjab National Bank of US$43 million by using fake bank "letters of understanding" to get loans. The official complaint says Modi, along with his wife, brother and business partner, worked with a pair of bank employees to get the letters.

None could be reached for comment on Thursday.

Indian news reports say the alleged US$43-million scam is a part of the larger fraud.

All left the country in early January, before the alleged fraud was uncovered, the Press Trust of India news agency reported, quoting unidentified officials.

Bank officials say the US$1.8-billion scam appears to have gone on since 2011, but was only discovered in January. Most involved letters of understanding sent to overseas offices of Indian banks, which made the actual loans, said Sunil Mehta, Punjab National Bank's managing director.

Mehta said the fraud remained under investigation, but the bank would take responsibility where it should.

"The bank will honour all its bona fide commitments," Mehta said.