Federal investigative agency took action against billionaire jewellers Nirav Modi and Mehul Choksi whose companies have been linked to the case.
The Income Tax department attached 29 properties and 105 bank accounts of Nirav Modi, his family and companies, PTI reported, quoting unnamed officials.
The CBI registered a fresh FIR against the Gitanjali Group promoted by Choksi, Modi’s uncle, and raided his offices. Officials said the FIR was based on a complaint from the PNB dated February 13, according to which the alleged loss to the bank was pegged at over Rs 4,886 crore.
The case is centred around Modi who is accused of colluding with bank employees to fraudulently obtain advances for payments to overseas suppliers to his business stretching from New York to London to Beijing.
The ministry of external affairs, which said it did know where the haut diamantaire was, suspended the passports of Modi and Choksi for four weeks, and has given them a week’s time to voice objections to its plan to revoke the documents.
“I can say with confidence that this gentleman [Nirav Modi] is not in touch with any of our officials and, frankly, at this stage, we are not aware about his location,” the ministry of external affairs spokesperson Raveesh Kumar said in a media briefing.
On Thursday, companies linked to Modi were raided and on Friday the CBI targeted the Gitanjali group of firms led by his uncle Mehul Choksi.
The agency raided premises of Gitanjali Group at 20 places — across Mumbai, Pune, Surat, Jaipur, Hyderabad and Coimbatore.
News agency PTI, quoting unnamed officials, said the Enforcement Directorate made a fresh seizure of Rs 549 crore worth of gold, jewellery and diamond on Friday. Thursday’s seizures included gold, diamonds, and precious stones worth around Rs 5,100 crore, said a Mint report.
Gitanjali has previously denied Choksi’s involvement in the fraud and said he would take “necessary legal action” to get his name removed from the police case.
The biggest bank fraud in India’s history has raised fears about the scale of problems in the banking sector that is already saddled with $147 billion of soured debt. India’s banks recently received a $14 billion government bailout.
It has also provided an opportunity for Prime Minister Narendra Modi’s critics to target the government for the loss caused to the state lender and accuse it of wrongdoing in high places.
Modi, the jeweller, was as recently as last month at the World Economic Forum in Davos where the prime minister, who is no relation of his, was a star guest.
A group of members of the youth wing of the main opposition Congress party staged a protest in New Delhi with placards that said “Modi robs India”.
Law minister Ravi Shankar Prasad said the government won’t spare anyone and that law enforcement authorities had seized assets worth Rs 1,300 crore from Modi.
Modi has not spoken about the case so far. His flagship company Firestar Diamond says it has no involvement in the case.
The new CBI case names three of Choksi’s companies, including Gitanjali Gems. The agency has alleged that two bank executives conspired to send unauthorised “letters of undertakings”, or LoUs, to overseas Indian bank branches to release funds to accused companies’ suppliers or clear their liabilities, the source said.
LoUs are issued by a bank giving some sort of a guarantee on behalf of a company. Other lenders give credit based on the LoU.
PTI reported the RBI saying it had not given any directions to PNB regarding honouring LoUs to other banks in this case.
PNB had said on Thursday it has suspended 10 employees during the investigation into the fraud which had gone on undetected for years. On Friday, the bank said it had suspended eight more officials, including a general manager, for their suspected involvement in the multi-crore scam, a senior government official said.
Shares in Gitanjali Gems fell 20% on Friday, while PNB, which has assets of $120 billion, sank for a third day and has lost more than a fifth of its market value since its disclosure earlier this week.
The state-run banking sector index was down 2.9%.
Indian banks, including PNB, have been stung by a surge in bad loans in the past four years, choking lending growth vital to accelerate the pace of expansion in Asia’s third-largest economy.
Analysts said the fraud case was likely to cast a long shadow over the banking sector, particularly state-run lenders, several of which had also provided loans under the assumption they were being backed by PNB.
Union Bank of India, another state-run lender, said on Friday it has an exposure of $300 million as a counter-party lender. Axis Bank, a private sector lender, has said it has sold all its exposure related to the fraud.
With investors fretting over the extent of its liability, The Economic Times newspaper reported that India’s central bank had directed PNB to pay the entire amount to counterparties.
Morgan Stanley estimated on Thursday if PNB had to assume all the liability from the fraud it would need Rs 80 billion rupees ($1.25 billion) in additional capital, which at the stock’s current valuation would mean a 14% dilution.