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Indian federal police have arrested three more employees of a state-run bank and closed down the branch at the centre of the biggest loan fraud in the country's history.
Key points:
- PNB said to have been cheated out of more than $2 billion
- Jeweller at centre of case, Nirav Modi, one of India's richest people
- Police also arrested two PNB employees over weekend
Billionaire jeweller Nirav Modi, who has sold diamonds to Hollywood and Bollywood stars, and others are accused of cheating the Punjab National Bank (PNB) out of $US1.77 billion ($2.24 billion).
Police said two previously arrested bank employees colluded with Mr Modi and his uncle to issue fraudulent letters of guarantee, which the businessmen used to raise loans from overseas Indian banks over a seven-year period.
Two officers looking after the foreign exchange department of the state-run bank and another who was responsible for checking communications on the SWIFT messaging platform were picked up in the latest swoop by the Central Bureau of Investigation (CBI).
The three officials — who the police accuse of supervisory lapses — are slightly more senior than the two PNB employees who were arrested by police and taken before a court over the weekend.
The arrests came as the ripples from India's biggest banking scam continued on Monday.
Finance Ministry points finger at Reserve Bank
The Finance Ministry pointed a finger at the Reserve Bank of India (RBI) for failing to pick up the fraud, which took place at a single branch of PNB in Mumbai, according to local media.
The Government has written a letter to the RBI, India's central bank, saying the failure to detect the fraud raised questions about its "efficacy of supervision to detect and check systemic failure", local media reported.
"Either the framework designed by RBI to prevent and detect such frauds is inadequate or RBI is unable to ensure its effective implementation," they quoted the letter as saying.
The three bank officials arrested on Monday were Bechhu Tiwari, a chief manager in charge of the foreign exchange department; Yashwant Joshi, a manager in the same department; and Praful Sawant, another bank officer, according to a source at the CBI.
Police have also issued lookout notices for Mr Modi and Mehul Choksi, who heads jewellery retailer Gitanjali Gems and other companies, both of whom are overseas.
One of Mr Modi's employees was arrested over the weekend and on Monday CBI agents carried out another search of the bank branch to gather evidence, the CBI source said.
PNB shares lose quarter of value
Mr Modi, who is one of India's richest people and counts Hollywood stars such as Kate Winslet and Dakota Johnson among his clients, has not commented on the allegations.
Police have said he and his family left India before PNB filed a complaint on the alleged fraud.
Mr Choksi has also not commented, and police have said he also left India last month.
PNB shares continued to slide, with about $US1.7 billion ($2.2 billion), or more than a quarter of the bank's market value, lost since the fraud was revealed last Wednesday.
Including direct loans given to companies of Mr Modi and Mr Choksi, Indian banks may be liable for more than $US3 billion ($3.8 billion), according to an internal tax department note.
Reuters
Topics: fraud-and-corporate-crime, law-crime-and-justice, banking, india, asia