The practice of illegally issuing letters of undertaking (LoUs) and foreign letter of credit (FLCs) and then rolling them over to favour Nirav Modi and Mehul Choksi groups started in 2008 and continued till these were discovered in January this year, according to CBI (Central Bureau of Investigation) officials.
The illegal operation resulted in a fraud of Rs113bn right under the nose of top Punjab National Bank officials. However, they claimed to be unaware of the scam.
The disclosures came during questioning of Rajesh Jindal, who was in charge of the Mumbai-based PNB’s Brady House branch between August 2009 and May 2011, Gokul Nath Shetty, a retired deputy manager from the same branch, Bechu B Tiwari (chief manager, in charge of forex department), Yashwant Joshi (scale II manager, forex department) and Prafful Sawant (scale I officer, export) by the CBI officials.
The officials claimed they merely continued with the practice which began in 2008. It was not immediately clear who was in charge of the forex department when the illegal practice started.
The CBI officials said the alleged multi-crore fraud of issuing LoUs and FLCs for sanction of loan to Nirav Modi and his uncle Mehul Choksi’s group of firms continued during Jindal’s tenure.
Jindal, posted as GM, credit, at PNB’s headoffice in New Delhi, headed the second largest branch of the bank when the practice of issuing the LoUs without sanctioned limits continued.
Arrested on Tuesday night after his day-long questioning in Mumbai, he was the 12th accused to be held in the case so far. CBI investigators managed to get Jindal’s custody till March 5 from the special CBI court on Wednesday.
Tiwari, Joshi and Sawant were also arrested on Monday for their alleged role in the scam and will remain in police custody till March 3.
All five PNB officials arrested so far were part of the forex department at the bank’s Brady House branch at the time of the fraud, said officials, adding these employees, in collaboration with the staff and associates of the firms headed by Nirav Modi and Choksi, committed the crime for personal gains.