Senior officials from Axis Bank on Tuesday appeared before the Serious Fraud Investigation Office (SFIO), which has started seeking details from lenders with exposure to firms promoted by Nirav Modi and Mehul Choksi with regard to the Rs 127-billion Punjab National Bank (PNB) scam.
A team from Axis Bank, led by Deputy Managing Director V Srinivasan and executives from the trade and transactions department, went to the SFIO’s office in Mumbai, after the investigating agency called them to help in the probe, sources said.
The officials were in the office for over two hours and are understood to have been asked about their business with firms like Choksi’s Gitanjali Gems and also Modi, according to sources. The SFIO is understood to have also called officials from other banks, including ICICI Bank, they said.
The SFIO also summoned PNB Managing Director and Chief Executive Officer Sunil Mehta for recording of his statement in connection with the fraud. He is expected to appear on Wednesday, officials said.
The SFIO, which is under the corporate affairs ministry, has written to each of the over-30 banks which have either loaned money to the scam-tainted firms or extended any services, sources said.
A slew of agencies, including the Central Bureau of Investigation and ministerial arms like the Enforcement Directorate as well as the SFIO, are probing the Rs 127-billion scam.
It is alleged that firms colluded with officials at a city branch of state-run PNB to clear letters of undertaking (LoUs) without proper diligence, resulting in the scam.
Axis Bank, the third-largest private sector lender, does not have any direct exposure to Gitanjali, while it was among the several banks whose overseas branches had loaned money to PNB based on the fraudulent LoUs.
ICICI Bank is the lead banker in the consortium of 31 banks which have a collective exposure of over Rs 68 billion to Gitanjali Gems. It does not have any exposure to companies linked with Modi. It is alleged that Choksi and Modi got LoUs and foreign letters of credit of Rs 126.36 billion issued in favour of foreign branches of Indian banks based on fraudulent claims.
An LoU is a guarantee which is 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 along with accruing interest. After media reports that ICICI Bank Managing Director and Chief Executive Chanda Kochhar, and her Axis Bank counterpart Shikha Sharma have been summoned by the SFIO regarding the case, stock exchanges have sought clarifications from both the lenders. The ICICI Bank scrip shed 2.64 per cent to close at Rs 295.10 a piece on the BSE, while Axis Bank lost 1.31 per cent to Rs 516.80.