Indian bank finds $1.8bn fraud at single branch
MUMBAI: India’s second-largest staterun bank said yesterday it had detected fraud of almost $1.8 billion at one of its branches, sending its shares plunging more than nine percent. The Punjab National Bank (PNB), one of several state-owned lenders the government is trying to clean up, said transactions worth $1.77 billion had been made “for the benefit of a few select account holders with their apparent connivance”.
It said they had occurred at a single branch in India’s financial capital Mumbai. “Based on these transactions other banks appear to have advanced money to these customers abroad,” the bank said, adding that the fraud had been reported to enforcement agencies for further investigation. The bank did not give any further details, or say which lenders were affected. It is unclear whether the latest statement is related to an earlier allegation that billionaire jeweler Nirav Modi and others defrauded the bank of more than $40 million.
Last week, the Central Bureau of Investigation (CBI) said it was looking into allegations about Modi, one of the country’s richest men. “Earlier this month, a first information report was lodged by PNB and we raided various locations. Investigations are still ongoing,” CBI spokesman Abhishek Dayal told AFP yesterday. Modi is worth $1.73 billion according to Forbes, placing him 85th on India’s rich list. The 47-year-old is the founder of jewellery giant Firestar Diamond while his high-end Nirav Modi brand has stores in some of the world’s major cities. Requests for comment from Modi’s spokesman went unanswered yesterday.
Firestar Diamond, one of his diamond retail companies, has previously said the earlier case was not connected to the company. Shares in PNB plummeted 9.22 percent on the Bombay Stock Exchange’s benchmark Sensex index in early afternoon trade following the bank’s announcement. Bloomberg News reported that the value of the illegal transactions amounted to eight times the bank’s net income last year. India’s government is trying to reduce the crippling debts of the country’s troubled lenders. It recently announced a $32-billion recapitalization plan for state-owned banks to help them clean up their books.