A new official who took charge noticed the fraud and wrote to the CBI on January 29, naming two PNB officials.
It took a retirement to unearth one of the biggest frauds in the banking sector.
Punjab National Bank (PNB) on Wednesday revealed in a stock exchange filing, fraudulent and unauthorized transactions worth Rs 11,360 crore at one of its Mumbai branches.
The case came to light on January 16, after diamond jeweler Nirav Modi’s company sought a fresh loan early last month. By then the PNB official they had allegedly been working in collusion with, had retired.
The new official who took charge noticed the fraud and wrote to the CBI on January 29, naming two PNB officials. The details are revealed in a complaint by PNB.
The letter by the PNB official to the CBI also said Modi had claimed to need the cash to pay his import bills but the Rs 280 crore raised weren’t used for this purpose in many cases but there were no more details on the same.
Since there was no sanctioned limit in the name of Modi’s companies, PNB said it asked for 100 percent cash margin to issue the letters of understanding. When Modi’s companies insisted they had used the facility before, PNB said it started digging.
In 2011, a letter of undertaking (LoU) was opened at PNB's Brady House, Fountain branch in Mumbai, by the alleged jeweler Nirav Modi and his partnership firms -- Diamond US, Stellar Diamonds and Solar Exports -- having partners Nirav Modi, Nishal Modi, Ami Nirav Modi and Mehul Chinubhai Chokshi.
In tandem with two PNB officials, they got unauthorized LOUs and discounted these with foreign branches of banks such as Axis Bank, Allahabad Bank, Union Bank of India and Bank of India. These banks transferred the money to PNB's Nostro account to be given to the jeweller to pay import bills to their foreign suppliers.
So far, there are no complaints against the other banks but they have sought the amount from PNB claiming the LOUs were fraudulent.
PNB has denied the liability stating unauthorized transaction but so far not elaborated on what impact the fraud may have on its financials, neither has it named other banks.However, it has cautioned 30 banks to stay alert on any further such unauthorised transactions.