India arrests 3 over huge bank fraud

Move comes amid intensifying probe into country's biggest bank scam, involving $2.3b

NEW DELHI • India's federal police arrested two employees at Punjab National Bank (PNB) believed to be at the centre of a staggering US$1.77 billion (S$2.3 billion) fraud, a police source said yesterday, in the first arrests so far in the country's biggest-ever bank scam.

Friday's arrests came amid an intensifying probe involving various authorities after India's second-largest state-run lender on Wednesday said it had been hit by fraud.

Gokulnath Shetty and Manoj Kharat are suspected of steering fraudulent loans to companies linked to billionaire jeweller Nirav Modi and to entities tied to jewellery retailer Gitanjali, which is led by Mr Modi's uncle Mehul Choksi.

The accusations against the two relatively junior officials at PNB were detailed in the lender's disclosure, and were also contained in a preliminary police report.

Also arrested was Hemant Bhat, whom the source described as the "authorised signatory" of the companies tied to Mr Modi.

All three are being questioned, the source said.

The whereabouts of Mr Modi, whose high-end jewellery has been worn by Hollywood stars including Kate Winslet, are unknown.

TV Station NDTV on Friday reported he was at a suite in a hotel in New York, citing household staff who answered the door.

The scale of the fraud has sparked a slew of probes into the lender, as well as into Mr Modi and Mr Choksi, and firms affiliated to both.

The Income Tax Department has also extended a probe into Mr Modi and his companies, looking into possible tax evasion and suspected investment of illegal funds, a spokesman told Reuters yesterday.

She said 29 properties and 105 bank accounts of Mr Modi and his group companies had been seized.

The Hindu newspaper reported yesterday that the Central Vigilance Commission, which investigates corruption in the government, has summoned senior officials of the Reserve Bank of India and the Finance Ministry to assess how all internal checks and balances failed to detect the fraud.

PNB officials were also summoned, the report said.

On Friday, New Delhi suspended the passports of Mr Modi and Mr Choksi amid reports they had fled.

Xinhua news agency said Mr Modi's wife Ami Modi and brother Nishal Modi have also fled India.

India's central bank said it "has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action".

The CBI has carried out raids on more properties connected to the pair and has contacted Interpol to track down Mr Modi.


A version of this article appeared in the print edition of The Sunday Times on February 18, 2018, with the headline 'India arrests 3 over huge bank fraud'. Subscribe