Investigators to quiz 31 Indian bank chiefs over $2bn PNB fraud

Separately, Serious Fraud Investigation Office has summoned chief executives at ICICI Bank and Axis Bank

epa06542832 A Central Bureau of Investigation official takes custody of computers of Punjab National Bank branch during a raid in Mumbai, India, 19 February 2018. According to media reports, Punjab National Bank (PNB), India's second-biggest state-run bank, detected fraud worth 1.77 billion dollar at a single branch in Mumbai.  EPA/DIVYAKANT SOLANKI
Beta V.1.0 - Powered by automated translation

Federal investigators are seeking to question the chiefs of India’s biggest lenders as they widen their probe into the $2 billion fraud at Punjab National Bank.

The Enforcement Directorate has written to the heads of 31 banks asking to meet officials about the fraud, according to people familiar with the matter. The investigators will start with state-run PNB on Wednesday and will subsequently cover the other lenders, the people said, asking not to be identified.

Separately, the Serious Fraud Investigation Office has summoned Chanda Kochhar, chief executive at ICICI Bank, and Shikha Sharma, her peer at Axis Bank, for a meeting on Tuesday, CNBC TV18 reported. Both private lenders reportedly have exposure to at least one of the two jewellers that allegedly masterminded the fraud.

"Just being summoned by the authorities doesn’t suggest that all these banks have colluded in the alleged fraud," said Pooja Dutta, a managing partner at Mumbai-based law firm Astute Law. Authorities are seeking clarity and "are leaving no stone unturned in building up a case without any loopholes," she said.


Read more:

India's $1.8bn jewellery scandal is down to risk management failure, former banker says

Nirav Modi fraud might be the revival of an iconic records shop 


The stock exchange has sought clarification and is awaiting a reply from ICICI Bank and Axis Bank, it said on its website. PNB, Axis and ICICI didn’t immediately reply to emails sent by Bloomberg. A text message to ED director Karnal Singh was unanswered. Calls to SFIO director Amardeep Singh Bhatia went unanswered.

The fraud was disclosed about a month ago, when PNB alleged that the jewellers colluded with some PNB officials to get fake letters of undertaking, which they used to obtain loans from the overseas branches of Indian banks. Investigators claim the scam had been running since 2011 and involves multiple regulatory infractions, leaving a web of lenders embroiled in questions about the quality of their compliance.

Shares of ICICI Bank tumbled 2.7 percent to a four-month low in Mumbai on Tuesday. PNB dropped 2.3 per cent and Axis Bank fell 1.4 per cent, pushing the 10-member S&P Bankex Index to its fifth day of declines.