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The jewellers and companies linked to Nirav Modi and Mehul Choksi had allegedly colluded with PNB officers to obtain fake bank guarantees to get loan from overseas branches of Indian banks including Allahabad Bank, Axis Bank and UCO Bank.
Punjab National Bank (PNB) has said that the alleged fraud perpetrated by jewellers Nirav Modi and Mehul Choksi may be around $2 billion, over $204 million more than previously estimated.
In a Monday night filing to stock exchanges, the state-owned lender said that "the quantum of reported unauthorised transactions can increase by $204.25 million."
The bank had earlier put the defrauded amount at Rs 11,394.02 crore ($1.77 billion). Adding another Rs 1,323 crore would take this to Rs 12,717 crore.
PNB said it has not received any instruction from the government to compensate other lenders for losses arising out of the fraud.
The jewellers and companies linked to them had allegedly colluded with PNB officers to obtain fake bank guarantees to get loan from overseas branches of Indian banks including Allahabad Bank, Axis Bank and UCO Bank.
The bank has enough capital/assets to pay for such liability in case of eventuality in accordance of law, PNB said in a separate statement to stock exchange made on Monday night.
In filings earlier this month, PNB said it stumbled upon the scam on January 25, 2018, and a fraud report was filed with the Reserve Bank of India on January 29.
On that day, a criminal complaint for registration of FIR was also made with the Central Bureau of Investigation.
Stock exchanges were informed of the fraud on February 5.
This was followed by another fraud report being submitted to the RBI on February 7, the day one more complaint was filed with the CBI.
On February 13, an FIR was filed with the CBI against Nirav Modi Group, Gitanjali Group and Chandri Paper & Allied Products Pvt Ltd, as also a complaint filed with Enforcement Directorate.
Stock exchanges were informed the next day, PNB had said in the filings.
In the complaint, PNB alleges that Modi and companies linked to him colluded with some of its officers including a former deputy general manager Gokulnath Shetty, who was posted in the foreign-exchange department of its Mumbai branch.
They fraudulently acquired guarantees to obtain loans from the overseas branches of Indian banks, claiming to need the cash to import pearls.
"On January 16, 2018, the partnership firm of Nirav Modi group approached our branch at Brady House, Mumbai, and presented a set of import documents with a request to allow buyers' credit for making payment to the overseas suppliers," PNB had said.
This happened after Shetty had retired.
And since there was no sanctioned limit for the firms, the branch officials asked them to furnish at least 100 per cent cash margin for issuing Letter of Undertaking (LoU) for raising buyer's credit.
"On denial, the firms contested that they have been availing such transactions since past several years," PNB had said.
On scrutiny, it was found that earlier LoUs were issued previously and internal messaging system was bypassed by placing instructions via the SWIFT global payment system asking overseas branches of Indian banks to fork out the cash as loans.
PNB said this followed a series of meetings with representatives of Nirav Modi group and Gitanjali group at Delhi and Mumbai "to impress upon them to pay the amount."
"Upon confirming the first maturity of LoUs liabilities on January 25, 2018 as fraudulently credit against bank, an FMR-1 (fraud report format of RBI) was submitted to the RBI on January 29, 2018 amounting to USD 44.22 million equivalent to Rs 280.70 crore (related to three group firms of Nirav Modi)," it had said.
On that day, a criminal complaint for registration of FIR was also made to CBI.
On February 7, another fraud report was submitted to the RBI on confirming the maturity of LoUs liability of USD 10.20 million (Rs 65.25 crore) relating to two companies of Gitanjali group promoted by Mehul Choksi.
Further, LoUs of $59.23 million (Rs 279.28 crore) also matured for Nirav Modi group, it said adding while investigation was on 10 officers/employees were suspended.
Hong Kong branches of Allahabad Bank and Axis Bank were asked to provide all communication with borrower, PNB said.
"On February 12, 2018, on the basis of investigation report, total fraud of Rs 11,394.02 crore in case of unauthorised issuance of Letters of Undertakings, Foreign Letter of Credits and Inland Letter of Guarantees in the group accounts of Nirav Modi Group and Gitanjali Group and in account of Chandri Paper and Allied Products Pvt Ltd was reported to RBI," it had said.
Image: The PNB scam is already one of the biggest in the Indian banking sector. Photograph: Danish Siddiqui/Reuters