The Central Bureau of Investigation (CBI) on Sunday made four arrests in connection with the alleged Rs 127 billion fraud at Punjab National Bank.
The agency has arrested two employees and an auditor of the Nirav Modi group of companies, while a director of the Gitanjali group of companies owned by Mehul Choksi has also been taken into custody, they said.
Manish K Bosamiya, the then AGM (operations) of Firestarter International Ltd owned by Nirav Modi, and then finance manager Miten Anil Pandya, were arrested for their alleged role in the preparation of applications for fraudulent letters of undertakings (LoUs) submitted to PNB, they said. Auditor Sanjay Rambhia, partner in the chartered accountancy firm Sampat and Mehta, Mumbai, has also been arrested, the officials said.
The CBI has also arrested the then Director of Mehul Choksi's company, Gili India, Aniyath Shiv Raman Nair.
It was alleged beside being one of the directors of the Gitanjali group of companies, he was the authorised signatory for the applications submitted to PNB for issuance of purported LoUs and Foreign Letters of Credit (FLCs), they said.
The accused officials of PNB did not enter the instructions for these LoUs and FLCs in their internal software to avoid scrutiny. These sent through an international messaging system for banking called SWIFT, used to pass instructions among banks globally to transfer funds.
An LoU is a guarantee given by an issuing bank to Indian banks having branches abroad, to grant short-term credit to the applicant.
In case of default, the bank issuing the LoU has to pay the liability to the credit-giving bank with accruing interest.
The PNB officials allegedly sent these messages to Indian banks — Canara Bank, State Bank of India, Bank of India, Axis Bank, Allahabad bank — located in Antwerp, Hong Kong, Bahrain, Mauritius, Frankfurt, without making entries in the banking software about the LoUs.
Upon receiving the messages from PNB under SWIFT, the banks abroad transferred these amounts into NOSTRO account of PNB with them.