INDIA’S PNB BANK FRAUD LIKELY TO SWELL BEYOND $2-BILLION MARK

The extent of the unravelling fraud at India’s state-run Punjab National Bank (PNB) could rise beyond the nearly $2 billion mark so far outlined by the lender, according to a source involved in the probe and court documents reviewed by Reuters.

The source, who asked not to be named, said investigators had not yet recovered all the papers and loan guarantees allegedly issued by rogue employees of the bank, and consequently believed the bank’s exposure could be greater than revealed so far.

In what has been dubbed as the biggest fraud in India’s banking history, PNB and police have accused two jewellery groups — one controlled by diamond tycoon Nirav

Modi and the other by his been estimated at ~64.98 billion, uncle Mehul Choksi — of colluding while firms controlled by Choksi with bank employees to have been accused of defrauding get credit from overseas banks the bank of ~61.38 billion. using fraudulent guarantees. India’s federal police, the

Both Choksi and Modi have Central Bureau of denied the allegations and Investigation (CBI), has told a lawyers for the two key accused Mumbai court that the amount PNB employees in the case have involving Modi’s companies also said they are innocent. was likely to go up, according

According to court filings, to the source and court filings, the exposure to three companies copies controlled of which by have Modi been has reviewed by Reuters.

The CBI told the court that its investigation had found that the fraudulent issuance of letters of undertaking (LoUs), or guarantees, through a Mumbai branch of the bank had been going on since 2010.

In papers filed on Monday, the CBI also said PNB did not have all the documents related to the LoUs, since those were returned to the borrower.

“Most of these documents are not yet recovered. The size of the fraud has now gone (up)... and the same is likely to go even higher,” the CBI said in the court filing. PNB did not respond to requests on Tuesday seeking comment on the risk of its exposure rising further.

The bank initially reported to authorities on January 29 that the jewellery groups had defrauded it of ~2.8 billion, or about $44 million. On February 14 it said the fraud sum had reached $1.77 billion after a detailed investigation.

It raised the amount further to nearly $2 billion last week, saying it had discovered some $200 million more in fraudulent letters of credit, another form of credit guarantee, issued to Choksi’s Gitanjali group.