Indian police target PNB Mumbai branch auditors in $2 bln fraud probe

MUMBAI/NEW DELHI, (Reuters) - Federal police in India yesterday told a court an internal auditor at a Mumbai branch of Punjab National Bank conspired with other officials to carry out a $2 billion fraud at the country’s second-biggest state lender.

The Central Bureau of Investigation (CBI) on Wednesday arrested auditor Mohinder Kumar Sharma, widening its probe into the biggest bank fraud in India’s history. On Thursday it accused Sharma of conspiracy in a filing to a Mumbai court, which committed him to police custody until March 13.

CBI also arrested a former PNB manager, Bishnubrata Mishra, who it said was responsible for audits at the same branch between 2011 and 2015. Mishra could not immediately be contacted for comment.

CBI has so far arrested at least 14 people, eight from the bank and six from companies owned by billionaire jeweller Nirav Modi and his uncle, Mehul Choksi, who owns Gitanjali Gems Ltd .

Modi and Choksi have been accused of colluding with Punjab National Bank (PNB) officials to secure unauthorised loans between 2011 and 2017, mostly from the overseas branches of Indian state banks. They left India in January before the fraud was unearthed, but have denied the charges through letters and statements.

Sharma was the internal chief auditor at the Brady House branch “who was supposed to verify the daily transactions, report the irregularities and ensure that the same are rectified to protect the interest of the bank,” CBI Inspector D. Damodaran said in the court filing.

But he, “in conspiracy with other co-accused persons, deliberately ignored to point out the issuance of illegal” letters of undertaking (LOUs) for companies owned by Modi and Choksi to raise loans from other banks, the inspector added.

Sharma’s lawyer Apoorv Vijay Singh told the court his client “had no opportunity to know about the messages” sent on international payments platform SWIFT by other bank officials as he did not have access to SWIFT.