CBI scans balance sheets of 18 Gitanjali group subsidiaries

New Delhi: The CBI is examining balance sheets of 18 India-based subsidiaries of the Gitanjali group of companies, promoted by Mehul Choksi, to understand the money trail of funds taken from various banks. The funds were taken on the basis of Rs 11,384 crore of guarantees furnished by the Punjab National Bank (PNB), officials said here on Monday.

The CBI officials said the agency is continuing the questioning of arrested bank officials – Gokulnath Shetty, Manoj Kharat and a signatory of Nirav Modi company’s – besides that of other officials of the PNB, to find out the money trail and depth of the alleged scam, spread across thousand of documents and digital records.

They said the agency is also analysing records recovered from a huge server seized during searches after registration of the FIR against Mehul Choksi. When asked about possible quid pro quo involved in the alleged scam perpetrated by billionaire diamond merchants Nirav Choksi and PNB officials, they said they are still looking into it and it cannot be clearly said if there were regular payments or not.

“Right now the focus is to understand the depth of the scam, the movement of funds and role of other senior officials,” an official said. One of the biggest financial scams of the country surfaced when the companies of Nirav and Choksi approached the PNB’s Brady road branch, Mumbai, in January this year seeking Letter of Understanding (LoU) for payments to suppliers.

The official handling the case had sought 100% cash guarantee before any such letters could be issued, to which the company officials said no such guarantee was sought in the past. The official checked the records, which did not show such Letters of Understanding (LoU) to Nirav or Choksi’s company, which led to suspicion.

It is alleged that Shetty, for the last seven years, was bypassing core banking system of the bank and issuing LoUs fraudulently. The LoU is a guarantee which is given by an issuing bank to Indian banks having branches abroad to grant a short-term credit to the applicant.

In case of default, the bank issuing the LoU has to pay the liability to credit giving bank along with accruing interest. Shetty and Kharat sent messages of these LoUs using an international messaging system for banking systems called SWIFT, which is used to pass instructions among banks globally to transfer funds.

The PNB officials 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 and Frankfurt without making entries in the banking software about the LoUs.

These LoUs and Letters of Credits (LC) worth Rs 11,384 crore were getting renewed or issued afresh during last six years without coming to the notice of the bank. The Indian banks abroad did not mind as their money was safe (under guarantee from the PNB) and increasing because of accruing interest.

The party was spoiled in January this year when first renewal arose after Shetty’s retirement, the officials said. An alarmed bank dug out all such LoUs and LCs showing a mammoth liability towards other banks.