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PNB exposure to alleged fraud swells to well above $2 billion

Reuters  |  MUMBAI 

By and Krishna V Kurup

MUMBAI (Reuters) - India's has told police it has uncovered additional exposure of about 9.42 billion rupees ($145.2 million) in connection with a huge alleged fraud, according to a court filing seen by

In what has been dubbed the biggest fraud in India's history, PNB, the country's second-biggest state-run lender, said last month it had been defrauded of about $2 billion.

The accused two - one controlled by diamond tycoon and the other by his uncle, - of colluding with rogue employees to secure credit from using fraudulent guarantees.

Both men deny any wrongdoing. Police say they left in January, before the initial complaint was filed, and their whereabouts are unknown.

In a court filing on Tuesday police said that, including a new complaint filed by the bank, the total amount Choksi's of companies allegedly defrauded of has reached 70.8 billion rupees ($1.09 billion).

A lawyer for Gitanjali group's head, Mehul Choksi, said he was unaware of the new allegations and declined to comment.

Law enforcement agencies had previously attributed 61.38 billion rupees of the alleged fraud amount to Gitanjali, and nearly 65 billion rupees to companies controlled by Modi.

has also alleged Modi's companies cheated it by a further 3.22 billion rupees, which it said was not used for the purposes for which the loans were given.

Tuesday's disclosure takes PNB's overall exposure in the still unravelling fraud case to well over the $2 billion mark.

did not immediately respond to requests for comment.


The alleged fraud has shaken India's financial sector, leading to a government and central crackdown on lenders' systems and practices.

Banks also continue to debate who should assume liabilities from the fraud, with several lenders that have either lent to the groups based on the fraudulent guarantees, or bought the so-called letters of undertaking from the secondary market, wanting to compensate them.

has said it will honour only "bona fide" commitments, arguing other banks that lent to the groups shared in the blame by not carrying out adequate checks.

daily, citing unnamed sources, reported earlier on Tuesday that would honour claims by peer banks that issued credit to the jewellers, but with a few caveats.

sources, however, said such an agreement was not yet a done deal.

"We are talking. But then we have not come to a conclusion," said a senior banker, who did not want to be named, adding that had not yet provided concrete assurances of repayment.

Another said that, although they were hopeful of arriving at an "amicable solution" on who takes the liability, it would likely need intervention by India's central and the government.

Banks would need to make provisions for any potential losses from fraud when they report results for the March quarter, said the

shares rose on Tuesday after an easing in allayed fears of a central interest rate increase in the near term, with the sector index gaining 2.3 percent.

(Reporting by and Krishna V Kurup; Writing and additional reporting by Devidutta Tripathy; Additional reporting by in Bengaluru; Editing by and Alex Richardson)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 18:58 IST