Mumbai/New Delhi: Regulators RBI and Sebi Friday stepped up the probe into the massive Rs 11,400-crore fraud at PNB as law enforcement agencies intensified their hunt for billionaire diamantaire Nirav Modi and his associate Mehul Choksi.
The Reserve Bank warned of “appropriate supervisory action”, saying it is assessing the control systems at Punjab National Bank (PNB).
Market regulator Sebi has launched a probe into trading and disclosure related issues of the state-owned bank, which has lost Rs 8,731 crore in market capitalisation in three days. The stock hit its 52-week low on both BSE and NSE Friday.
Meanwhile, the Indian Banks’ Association (IBA) has convened a meeting Saturday to deliberate on the ramifications of the scam, which has also affected other banks including SBI, Union Bank, Allahabad Bank and Axis Bank.
Chartered accountants’ apex body ICAI has also taken suo moto cognisance of the USD 1.77 billion fraud and has sought information from investigation agencies, besides setting up a group to study the systemic issues arising out of the case.
Separately, the corporate affairs ministry has identified 150 shell companies related to Modi and his associates.
In parallel developments, Enforcement Directorate continued raids on assets related to jewellery designer Modi and Mehul Choksi, the promoter of Gitanjali Gems and co-accused in the fraud case.
Premier investigating agency CBI is also probing the case.
The Income Tax Department attached 29 properties and 105 bank accounts of Modi, his family and companies, said officials, adding he has been booked under the new anti-black money act for alleged possession of illegal assets abroad.
Meanwhile, the Ministry of External Affairs has suspended passports of Modi and Choksi for four weeks at the request of ED.
In a late evening statement, the Reserve Bank said it has already undertaken a supervisory assessment of control systems in PNB, wherein billionaire Nirav Modi allegedly acquired fraudulent letters of undertaking (LoUs) from a branch in Mumbai to secure overseas credit from other Indian lenders.
“The fraud in PNB is a case of operational risk arising on account of delinquent behaviour by one or more employees of the bank and failure of internal controls.
“RBI has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action,” it said.
The RBI also denied media reports that it had directed PNB to meet its commitments under the letters of undertaking (LoUs) to other banks.
PNB has suspended eight more officials, including one at the general manager level, for their suspected involvement in the multi-crore scam, a senior government official said.
The official also said that PNB will repay other banks their dues by March 31 and that would be funded from internal resources.
The country’s largest lender SBI said it has an exposure of USD 212 million (about Rs 1,360 crore) in respect to LoU issued by PNB to Nirav Modi, but does not have any direct exposure to the jewellery designer.
ICAI President Naveen ND Gupta said that it has taken suo moto cognisance of the fraud at Punjab National Bank.
“The Financial Reporting Review Board (FRRB) has been advised to ‘initiate suo moto review’ of Punjab National Bank and Gitanjali Gems (matter),” he said.
Gitanjali Gems shares continued to slump with a plunge of 20% Friday. This is the third straight session of decline for the stock.
The stock market dealings of billionaire jeweller Modi his relative and close associate Choksi came under the scanner of Sebi and stock exchanges following PNB’s declaration of the fraud.
When contacted, payment gateway SWIFT said: “SWIFT does not comment on individual customers or entities. When a case of potential fraud is reported to us, we offer our assistance to the affected user to help secure its environment.”
The instructions for clearance of alleged fraud LoUs issued in favour overseas branches of Indian banks were passed on through the SWIFT gateway.