CBI quizzes top PNB official in Nirav Modi case

New Delhi: The CBI on Monday questioned S.K. Chand, the general manager of Punjab National Bank (PNB) who handles the treasury section, in connection with its investigation into the alleged Rs 12,636 crore bank fraud case involving billionaire jeweller Nirav Modi and his uncle Mehul Choksi.

The CBI, on Sunday, arrested four people — two employees and an auditor from Nirav Modi’s group of companies, and a director of Gitanjali group of companies in connection with the case.

There are allegations that Choksi and Modi got letters of undertakings (LoUs) and foreign letters of credit (FLCs) of Rs 12,636 crore issued in favour of foreign branches of Indian banks based on fraudulent claims. The accused officials of PNB did not enter the instructions for these LoUs in their internal software to avoid scrutiny. They were sent through an international messaging system for banking called SWIFT, which is used to pass instructions among banks globally to transfer funds.

An LoU is a guarantee, which is given by an issuing bank to Indian banks with branches abroad to grant short-term credit to the applicant. In cases of default, the bank issuing the LoU has to pay the liability to the credit giving bank along with accruing interest.

The PNB officials allegedly sent these messages to Indian banks — Canara Bank, State Bank of India, Bank of India, Axis Bank, and Allahabad Bank — located in Antwerp, Hong Kong, Bahrain, Mauritius, and Frankfurt without making entries in the banking software about the LoUs. After receiving the messages from PNB under SWIFT, the banks abroad transferred these amou-nts to the Nostro account of PNB with them. Nostro account is an account that a bank holds in a foreign currency in another bank to enable foreign trade by its clients.