The CBI has registered a disproportionate assets case against retired deputy manager of Punjab National Bank (PNB) Gokulnath Shetty, a key accused in the Rs 11,400-crore scam involving Nirav Modi, for allegedly amassing wealth 200 percent more than his known sources of income, officials said on November 16.
The case was registered by the CBI's Anti Corruption Branch in Mumbai against Shetty and his wife Ashalata for allegedly amassing a large number of moveable and immoveable properties during the period between April 1, 2011 and May 31, 2017, the day he retired.
According to the CBI FIR, the couple had amassed disproportionate assets to the tune of Rs 2.63 crore during the period.
Shetty and his wife Ashalata, who is a clerk with Indian Bank, "had acquired disproportionate assets to the tune of Rs 2.63 crore, which are 238.44 percent disproportionate to their known sources of income", the CBI FIR alleged.
It also said that Ashalata had "been found to have actively assisted her husband in the concealment and acquisition of assets raised from ill-gotten wealth and thereby has abetted the offence of possession of disproportionate assets by a public servant".
Shetty was arrested by the Central Bureau of Investigation (CBI) in February this year after the banking fraud involving billionaire jewellers Nirav Modi and Mehul Choksi surfaced.
The scam surfaced when companies of Nirav Modi and Choksi approached PNB's Brady Road branch, Mumbai, in January this year seeking Letter of Understanding (LoU) for payments to suppliers.
The official handling the case sought 100 percent cash guarantee before any such letter could be issued to which the company officials said no such guarantee was sought in the past.
The official checked the records which did not show such an LoU to Modi or Choksi's company which led to suspicion.
It is alleged that Shetty had been bypassing PNB's core banking system and issuing LoUs fraudulently for seven years.
An LoU is a guarantee which is given by an issuing bank to Indian banks having branches abroad to grant a short-term credit to the applicant. In case of default, the bank issuing the LoU has to pay the liability to credit giving bank along with accruing interest.
Shetty allegedly sent messages of these LoUs using an international messaging system for banking systems called SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is used to pass instructions among banks globally to transfer funds.
It is estimated that millions of messages are sent daily using the SWIFT technology globally wherein every member bank can send or receive messages of financial transactions to another bank worldwide.
The PNB officials allegedly sent these messages to Indian banks -- Canara Bank, State Bank of India, Bank of India, Axis Bank, Allahabad Bank -- located in Antwerp, Hong Kong, Bahrain, Mauritius, Frankfurt without making entries in the banking software about the LoUs.
These LoUs and Letters of Credits (LC) worth Rs 11,384 crore were getting renewed or issued afresh for six years without the bank's knowledge.
The Indian banks abroad did not mind as their money was safe (under guarantee from PNB) and increasing because of the accruing interest.
The party was spoiled in January this year when the first renewal arose after the retirement of Shetty, the officials said.
An alarmed bank dug out all such LoUs and LCs showing a mammoth liability towards other banks.
The conniving officer also issued Foreign Letters of Credit by entering a smaller amount in trade finance module of Core Banking Solutions (CBS) system and generating the reference number and a SWIFT message was sent for the amount, the bank alleged.
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