NEW DELHI (BLOOMBERG) - Shortly after a US$2 billion (S$2.6 billion) bank fraud was uncovered last month (February) at India's state-owned Punjab National Bank, a picture emerged of Prime Minister Narendra Modi with the alleged fraudster.
The photo showed PM Modi posing at the World Economic Forum in Davos on Jan 23 with a large business delegation that included billionaire jeweller Nirav Modi, who is at the centre of the unfolding scandal.
That was enough for opponents and even one of PM Modi's coalition partners to question his commitment to rooting out corruption - a key part of his pitch to voters.
Government officials said the jeweller was just part of a separate, non-official business delegation, and that the prime minister had only stopped by for a photo.
Still, the scandal may already be having an impact. On March 14, PM Modi's ruling Bharatiya Janata Party (BJP) lost three by-elections in the populous and politically crucial states of Uttar Pradesh and Bihar.
While investigations continue into India's biggest-ever bank fraud, the by-election results show the BJP's reputation is on the line as it faces several state-level polls and a general election over the next 12 months.
Riding to power on a pledge to unearth unaccounted wealth, PM Modi justified a move to ban 86 per cent of the country's currency in November 2016 on an anti-graft push, a policy that hurt the economy due to its botched implementation.
"This case could well deliver a blow to the Modi administration's anti-corruption bonafides," said Mr Michael Kugelman, Asia programme director at the Woodrow Wilson Centre in Washington, D.C.
"The government's response will be subjected to ample scrutiny in India and beyond, not just because it has emphatically and repeatedly called for crackdowns on corruption, but because of Modi's close ties to big business."
Mr Nirav Modi, who has dressed actresses including Kate Winslet and Priyanka Chopra, has been accused - along with his uncle Mehul Choksi - of defrauding Punjab National Bank. The bank alleges the duo and their associates worked with some rogue employees and used fake guarantees to obtain loans from abroad. Both deny the allegations.
Though Mr Nirav Modi shares the same surname as the prime minister, the two are not related.
In addition to the photo, critics are also looking to undermine the government with a video from 2015 of the prime minister addressing Mr Choksi as Mehul-bhai - an affectionate term for brother.
Mr Jagdish Thakkar, a spokesman in the Prime Minister's Office, did not respond to a call seeking comment.
PM Modi's administration had formed a so-called Banks Board Bureau to improve governance standards and underwriting processes at state-run lenders. However, the bureau said it has not heard back from the Finance Ministry on recommendations made a year ago, according to a statement on March 19.
Government opponents say the fact that the alleged fraudster remains abroad and beyond Indian law enforcement shows that PM Modi's administration takes a lax approach to the country's globe-trotting industrialists. They also cite the case of Mr Vijay Mallya, the tycoon behind India's bestselling beer who is battling extradition in a British court to avoid fraud charges.
Even some of PM Modi's political allies have spoken out.
"This has affected the image of this government," said Mr Anil Desai, spokesman for the Shiv Sena, a BJP ally and national alliance partner. "We will be after the government very rigorously on this issue."
PM Modi's government has dispatched four ministers and his party's powerful national president, Mr Amit Shah, to distance itself from the scandal. It also barred 91 people from travelling abroad because of their involvement with companies that have defaulted, Bloomberg News reported last week.
Soon after the scandal broke, PM Modi's Law Minister Ravi Shankar Prasad promised that "nobody, irrespective of their status or stature, shall be spared".
The Finance Ministry also launched a high profile attempt to deflect blame away from the government, which owns Punjab National Bank, towards the bank's management and the regulator - the Reserve Bank of India.
Meanwhile, the Defence Minister and the Junior Foreign Minister blamed the previous Congress party-led government for the scam. They suggested that a few days before PM Modi took charge in 2014, the Congress administration opened up a gold programme earlier restricted to state-run firms to include private businesses such as those of Mr Nirav Modi's.
The government on March 12 announced a probe into the 2014 programme, which forced jewellers to export 20 per cent of gold imports because of India's then-stressed current account deficit.
"The allegations about the gold import scheme are a red herring," Congress spokesman Sanjay Jha said. "These baseless allegations are being made because the heat is on the government and especially on Narendra Modi."
Some doubt the opposition Congress party can effectively wield the scandal against PM Modi. Party leader Rahul Gandhi has failed to turn even more disruptive and sensational events to his advantage, including demonetisation and the chaotic roll-out of a national sales tax in 2017.
But this time has the potential to be different, particularly with a slew of crucial elections on the way.
"The risk of this one sticking is more than any other," said Mr Shailesh Kumar, an Asia analyst with Eurasia Group. "Even though a lot of the scam took place before the BJP, it's a complex scandal unlike a straight bribery allegation, which further gives the opposition an opportunity to spin it."