The Serious Fraud Investigation Office (SFIO) has summoned ICICI Bank chief Chanda Kochhar and Axis Bank chief Shikha Sharma to seek information on the evolving Punjab National Bank fraud involving diamantaires Nirav Modi and Mehul Choksi.
And as the fraud at state-run Punjab National Bank (PNB) unfolds it seemed the amount involved could rise beyond the nearly $2 billion mark so far outlined by the lender.
SFIO, a multi-disciplinary organisation under the ministry of corporate affairs to investigate white-collar crimes and initiate prosecution, is trying to unravel the intricate operations involving irregular issue of letters of undertaking (LoU)/foreign letter of credit (FLC) by a PNB branch in Mumbai to the companies promoted by Modi and Choksi, and figure out how they had been honoured by Indian banks' Hong Kong branches to extend working capital to them.
Both Kochhar and Sharma have been summoned for giving Rs5,280 crore working capital facility to Mehul Choksi-promoted Gitanjali Group by a consortium of 31 banks. ICICI Bank, with a loan of Rs405 crore reportedly, was a lead banker in this consortium and Axis Bank too had a major exposure in it.
Reports quoting sources said investigators have not yet recovered all the papers and loan guarantees allegedly issued by rogue employees of the bank, which they believe could lead to greater exposure of the bank to the fraud.
In what has been dubbed the biggest fraud in India's banking history, Punjab National Bank (PNB) and police have accused two jewellery groups - one controlled by diamond tycoon Nirav Modi and the other by his uncle Mehul Choksi - of colluding with bank employees to get credit from overseas banks using fraudulent guarantees.
Both Choksi and Modi have denied the allegations and lawyers for the two key accused PNB employees in the case have also said they are innocent.
According to court filings, the exposure to three companies controlled by Modi has been estimated at RS6,498 crore ($1 billion), while firms controlled by Choksi have been accused of defrauding the bank of Rs6,138 crore.
The Central Bureau of Investigation (CBI) has told a Mumbai court that the amount involving Modi's companies was likely to go up, reports quoting sources said.
''SFIO has today sought information on the accounts of the Nirav Modi & Gitanjali groups of companies,'' Axis Bank said in a statement to the stock exchanges. The bank's exposure to these entities is about Rs200 crore, it added.
A consortium of 31 banks had extended Rs5,280 crore working capital facility to Choksi's companies. SFIO sources indicated they may soon summon other banks that are part of the consortium.
ICICI Bank said in a statement that it has no exposure to the Nirav Modi group of companies but noted, ''We are working capital lenders to the Gitanjali group of companies along with several other banks in the consortium.'' Its exposure to the Gitanjali group, it said, is not the largest among the lenders in the consortium. The bank said it is co-operating with the investigating agencies.
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.
Jeweller Modi along with his family left India in January before PNB filed a police complaint and, according to police, Choksi is also out of India.
Finance minister Arun Jaitley, however, told parliament on Tuesday that PNB had ''sound fundamentals and strong growth potential'' with its high share of low-cost current and savings accounts deposits, stabilising bad loans and scope to raise funds by selling non-core assets.