CBI questions ex-RBI deputy governor in PNB fraud case: source

NEW DELHI (Reuters) - The Central Bureau of Investigation has questioned a former deputy governor of the Reserve Bank of India, H.R. Khan, as part of an investigation into a $2 billion fraud at state-run Punjab National Bank, a government source said on Friday.

Khan, who was one of the RBI's four deputy governors for five years until July 2016, was not immediately available for comment.

Four senior RBI officials were quizzed by the CBI on Thursday although sources told Reuters they were not suspected of wrongdoing and had been asked to explain how banking processes work.

CBI has also quizzed PNB and other bank officials about the case, which came to light in early February.

In what has been called the biggest fraud in India's banking history, two jeweller groups have been accused of defrauding banks by raising loans from overseas branches of Indian lenders using nearly $2 billion of fraudulent guarantees issued by rogue staff at a Mumbai branch of PNB.

The bank has said it is working with investigative agencies and regulators in the probe, in which authorities have so far arrested 20 people including executives from the state-run bank.

The RBI has faced criticism that it failed to detect the long-running fraud, or to correct a breakdown of normal practices at the nation's second-largest state-run bank.

The regulator, however, has argued that it had "very limited authority" over state-run banks and called for reforms to give the RBI more powers to police such lenders.

(Reporting by Nigam Prusty and Neha Dasgupta; Writing by Aditya Kalra and Devidutta Tripathy; Editing by Sanjeev Miglani and Catherine Evans)