In what could be the biggest banking fraud in India, state-owned PNB had on Wednesday said it detected a Dollars 1.77 billion (about Rs 11,400 crore) scam in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.
When the details of the extent of the fraud, almost 7 times the profit earned by the nation's second-largest public bank, were made public earlier this week, it was found that Nirav Modi, along with his brother, wife and business partner Mehul Choksi had already left the country on January 1.
Even as the government said that the Nirav Modi loans dated back to 2011 when the UPA was in power, Congress spokesperson Randeep Singh Surjewala wanted to know what steps the prime minister had taken to stop India's "biggest banking scam".
The Enforcement Directorate today conducted multiple searches in connection with a Rs 280 crore money laundering case against the designer and others following a complaint by PNB.
India's second largest state-run bank has uncovered a $1.8bn (£1.3bn) scam linked to a single Mumbai branch.
PNB said in an announcement to the stock exchange on Thursday evening that it had suspended 10 employees during the investigation into the fraud, which Mehta said had gone on undetected for years.
"The stock worth Rs 5100 crore including gold & diamond jewellery, precious stones etc recovered during the searches were seized under PMLA", the agency said in a statement.
Modi's jewellery stores and other business establishments were raided by law enforcement officials in Mumbai and New Delhi on Thursday, Reuters witnesses said.
The bank became suspicious only on January 16 when the accused companies - Diamond R US, Solar Exports and Stellar Diamonds (all accused in the CBI FIR) - approached it with import documents and a request to issue Letters of Understanding (LoUs) for raising buyers' credit for making payments to the overseas suppliers.
The lender said two junior officials at one of its branches in Mumbai had issued "letters of undertaking" to get overseas branches of other lenders to extend credit to "a few select account holders". "We have not received any directive from the Reserve Bank of India yet but they are our regulator and we would follow their orders", he added.
Taking a dig at the PM, Rahul Gandhi tweeted: "Guide to Looting India by Nirav MODI. 1".
The fear is that since it was PNB that issued the LoUs, they would stand liable for the entire Rs 11,400 crore, which is roughly a third of its market capitalisation and more than 50 times its net profit for the third quarter of fiscal 2017-18. "Nirav Modi had arrived in Davos on his own and was present at CII group photo event", claimed Prasad.
Ami Modi, Nirav's wife, left for Zurich on January 6, 2018.