Indian police arrest six as inquiry widens into bank fraud

MUMBAI — An Indian court has remanded six people including a general manager at state-run Punjab National Bank in police custody for nearly two weeks, after the latest arrests in a probe into an alleged $1.8 billion fraud.

Among those arrested on Wednesday by the Central Bureau of Investigation was Rajesh Jindal, currently a general manager with the bank, who between August 2009 and May 2011 ran the Mumbai branch at the center of the biggest fraud in Indian banking history.

Five executives from companies run by billionaire jeweler Nirav Modi and his uncle Mehul Choksi, who heads Gitanjali Gems, were also arrested on Tuesday.

They were presented before a Mumbai court, which allowed a police request to keep them in custody until March 5 for further questioning. The five executives included Vipul Ambani, the finance chief of Modi’s flagship Firestar group of companies.

Jindal is the highest ranking PNB executive to have been arrested so far in the case, which has also led to the detention of five other employees of the bank, including two branch officials it accuses of colluding with executives from Modi and Choksi’s companies to help them obtain fraudulent loans.

A lawyer for Modi, who runs eponymous high-end diamond jewelry stores that spread from New York to Beijing, has denied any wrongdoing by his client. Choksi has not commented on the case but Gitanjali, in a stock exchange filing, has denied his involvement in the alleged fraud.

The bank has alleged that as far back as 2011, firms tied to the pair began receiving fraudulent letters of undertaking, or LOUs, from its Brady House branch in Mumbai that enabled them to borrow money from overseas banks.

“During his tenure at PNB Brady House branch, the practice of issuance of LOUs without sanctioned limits to Nirav Modi group firms had started,” a CBI spokesman said, referring to Jindal.

The bank has not commented on the arrests since it triggered the inquiry with a complaint to federal police.

The fraud has cast a shadow on the workings of the state-run banks, which dominate lending activities in Asia’s third-largest economy. Finance Minister Arun Jaitley on Tuesday decried a “lack of ethics” among sections of Indian business and criticized inadequate oversight by auditors and regulators.