Mumbai: Senior officials from private sector lenders ICICI Bank and Axis Bank on Tuesday appeared before the Serious Fraud Investigation Office (SFIO) with regard to investigations into the over Rs 12,000-crore PNB scam. Axis Bank revealed that it has a Rs 200-crore exposure to the scam-tainted companies promoted by Nirav Modi and his uncle Mehul Choksi.
Sunil Mehta, the managing director and chief executive of Punjab National Bank, which is at the centre of the scam, has also been summoned tomorrow, sources said, adding officials from all over 30 banks which have had business dealings with the company are being called. 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 here, after the investigating agency called them to help in the probe.
“The SFIO has today sought information on the accounts of the Nirav Modi and Gitanjali groups of companies. We would like to state that exposure of Axis Bank to these entities is approximately Rs 200 crore,” it said in a late evening regulatory filing. The team from Axis Bank was followed by a senior manager from its larger rival ICICI Bank also going into the south Mumbai office of the agency, where he answered questions regarding its exposure to Gitanjali Gems, sources said.
With an outstanding of over Rs 600 crore to Gitanjali, ICICI Bank is the lead bank in the consortium of 31 banks which have loaned over Rs 6,800 crore to the company.
The SFIO has written to the top managements of all the lenders who have either given loans or extended any other services, sources said, adding that the total number could be around 35. A slew of agencies, including the CBI and ministerial arms like the Enforcement Directorate as well as the SFIO are probing the PNB scam. It is alleged that firms colluded with officials at a city branch of state-run PNB to clear letters of undertakings (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. It is alleged that Choksi and Modi got LoUs and foreign letters of credit (FLCs) of Rs 12,636 crore 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 SFIO regarding the case, stock exchanges had sought clarifications from both the lenders. Both the lenders replied late in the evening, saying the SFIO action will not have any material impact on them.
“ICICI Bank has no exposure to the Nirav Modi group of companies, nor has it issued any Letter of Undertaking; nor has any buyer’s credit exposure against LOUs with respect to the Nirav Modi group of companies as well as the Gitanjali group of companies,” the ICICI Bank response said. The ICICI Bank scrip shed 2.64 per cent to close at Rs 295.10 a piece on BSE, while Axis Bank lost 1.31 per cent to Rs 516.80.
