Concerned over fraud of over Rs 113 billion (Rs 11,300 crore) at Punjab National Bank (PNB), the finance ministry has asked all banks to send reports involving this case or other such incidents latest by the end of this week.
Based on these transactions, other banks appear to have advanced money to these customers abroad, it said.
Since more than one lender is involved, all banks have been asked by the Department of Financial Services to submit a status report soon on the fraud, official sources said.
They said the Letter of Undertaking was issued fraudulently by PNB to billionaire diamond merchant Nirav Modi and associates and was encashed overseas by them from different banks, both private and public sector.
All this was being carried out in connivance with officials as high as Deputy General Manager since 2011, sources added.
As a corrective measure, PNB has suspended 10 employees in connection with the fraud.
The finance ministry has asked, through the reform agenda circulated to the banks on January 24, that dubious accounts should be scrutinised and appropriate action against fraudsters be taken with zero tolerance, sources said.
Banks should not dither from taking action against their own employees in case of collusion if there is sufficient ground, they added.
Meanwhile, the bank has also lodged complaint with the CBI against billionaire jewellery designer Nirav Modi and a jewellery company about fraudulent transactions worth Rs 100 billion (Rs 10,000 crore).
The agency received the complaints about the transactions detected by the public sector bank late last night, the sources said.
The allegations are being looked into and future course of action will be decided soon, they said.
Agency sources said Modi is already facing a CBI probe on a complaint from the Punjab National Bank.
This is the second incident in less than 10 days where a bank has been defrauded by the same person.
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