PNB Scam: Absconding billionaire jeweller Mehul Choksi under CBI scanner

Apr 11, 2018, 19:52 IST | PTI

The USD 2 billion scam became public in January after the CBI registered an FIR in the matter, but by that time both the high-profile jewelers had left India with family

Mehul ChoksiMehul Choksi

A loan of Rs 5,280 crore extended by a consortium of 31 banks led by ICICI Bank to the companies of absconding billionaire jeweller Mehul Choksi has come under the scanner of the CBI, officials said on Wednesday. The agency questioned three officials from foreign branches of Indian banks, which had given credit facilities to the companies of absconding billionaire jewelers Nirav Modi and Mehul Choksi, on the basis of Letters of Undertaking (LoUs) issued by Punjab National Bank's Brady House branch in Mumbai.

The USD 2 billion scam became public in January after the CBI registered an FIR in the matter, but by that time both the high-profile jewelers had left India with family, they said. Two officials of Canara Bank's branch in Bahrain, including its branch manager, and an official of Bank of India's branch in Antwerp in Belgium were questioned by a CBI team in Mumbai, they said.

Meanwhile, the agency officials said that while their focus remains on the fraudulent LoUs, the loan of Rs 5,280 crore to the companies of Choksi in 2016 will come under its probe at a later stage. They said whether a fresh FIR will be registered in the case or the ambit of an existing FIR will be expanded, will be decided before proceeding with the action in the matter.

The agency in February had examined a senior ICICI Bank functionary too, they said. It is alleged that Choksi and Modi got LoUs and Foreign Letters of Credit (FLCs) of USD 2 billion issued in favour of foreign branches of Indian banks based on fraudulent claims.

The accused PNB officials did not enter the instructions for these LoUs in their internal software to avoid scrutiny. They were sent through an international messaging system for banking called SWIFT, which is used to pass instructions among banks globally to transfer funds.

A LoU is a guarantee given by an issuing bank to Indian banks having branches abroad to grant short-term credit to the applicant. In case of default, the bank issuing the LoU has to pay the liability to the credit-giving bank along with the accruing interest.

The PNB officials allegedly sent these messages to Indian banks - Canara Bank, State Bank of India, Bank of India, Axis Bank, Allahabad Bank - located in Antwerp, Hong Kong, Bahrain, Mauritius, Frankfurt without making entries in the banking software about the LoUs.

Upon receiving the messages from PNB under SWIFT, the banks abroad transferred these amounts into Nostro account of PNB with them. A Nostro account is an account that a bank holds in a foreign currency in another bank to enable foreign trade by its clients.

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