PNB fraud balloons to Rs 12,636 crore; govt directs banks to probe all NPAs over Rs 50 crore

Jolted by the PNB fraud and other bank scams surfacing in recent days, the Finance Ministry on Tuesday directed public sector banks to investigate all bad loan (NPA) accounts exceeding Rs 50 crore for possible fraud and in case of any adverse findings report the cases immediately to the CBI.

The direction comes amid state-owned lender PNB reporting that the money lost in the fraud involving misuse of letters of undertaking (LoUs) by rogue jeweller Nirav Modi and his uncle Mehul Choksi has shot up to around Rs 12,700 crore. CBI officials also confirmed that fresh LoUs to the tune of Rs 1,251 crore linked to the Gitanjali group of companies have been unearthed by PNB which takes the value of the fraud to Rs 12,636 crore.

In dollar terms the money swindled from banks by the absconding jewellers has now gone up to $2 billion from $1.77 billion estimated earlier. Other public sector banks, too, have approached the CBI as in the Rotomac Group and Simbhaoli Sugars cases in which loans have not been returned.

Financial Services Secretary Rajiv Kumar, said in a tweet that managing directors of public sector banks have been directed to detect frauds and consequential wilful default in time and refer cases to CBI. They have been asked to examine all NPAs (non-performing accounts) above Rs 50 crore, he added.

Public sector banks have also been asked to involve the Enforcement Directorate (ED) and Directorate of Revenue Intelligence (DRI) for any violations of the prevention of money laundering act , FEMA or exportimport norms.

State-owned banks, with combined gross non-performing assets (NPAs) of about Rs 8.5 lakh crore, have been asked by the ministry to go in for prompt fraud identification and take action within prescribed deadlines. Kumar further said the chief vigilance officer of the bank concerned will have to vet complaints and coordinate with CBI for frauds exceeding Rs 50 crore. Also, banks will have to seek borrower status report from Central Economic Intelligence Bureau (CEIB) on the account turning NPA and CEIB will have to revert in a week.

According to sources, more than two dozen banks have decided to seek a forensic audit to establish if Mehul Choksi-led Gitanjali Gems has indulged in fraud or not. A consortium of 31 lenders led by ICICI Bank, has an over Rs 6,000 crore exposure to the company and appointed TR Chadha & Co to determine if Gitanjali had indulged in any financial fraud.

PNB has informed the stock exchanges that the alleged fraud perpetrated by jewellers Nirav Modi and Mehul Choksi may be around USD 2 billion, which works out to over USD 204 million more than previously estimated. In a late night filing to stock exchanges, PNB said that the quantum of reported unauthorised transactions can increase by USD 204.25 million.

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 unauthorised bank guarantees to get loans from overseas branches of Indian banks including SBI, Allahabad Bank, Axis Bank and UCO Bank.

The bank also told the stock exchange that it has enough capital/assets to pay for such liability in case of eventuality in accordance of law. 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 CBI.

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.