Senior Bank Official Arrested In India’s Diamond Fraud Scandal

A senior official of state-run Punjab National Bank (PNB) in India was arrested by federal police as part of an investigation into a $1.8 billion scam at the bank.

According to news from Reuters, the Central Bureau of Investigation (CBI) in India arrested Rajesh Jindal, who served as the head of the bank’s Brady House branch in Mumbai between August 2009 and May 2011.

The arrests are the result of alleged fraud involving firms associated with diamond merchants Nirav Modi, the billionaire jeweler, and his uncle, Mehul Choksi, who heads jewelry retailer Gitanjali Gems.

Earlier this week, it was revealed that two additional arrests were made of officers in charge of the foreign exchange department at the state-run bank. The third arrested officer was in charge of checking the SWIFT communications.

Two other employees arrested last week were accused of helping provide fake loans to Modi and Choksi’s businesses. Those two initially detained employees were Gokulnath Shetty and Manoj Kharat.

Punjab National Bank filed the initial complaint to federal police, accusing two of its employees of sending out the fraudulent letters. Jindal is the highest ranking bank official that has been arrested to date.

According to the allegations, which stretch as far back as 2011, firms tied to Modi and Choksi received fraudulent letters of undertaking (LOUs) from the Brady House branch allowing them to borrow money from overseas banks.

“During his tenure at PNB Brady House branch, the practice of issuance of LOUs without sanctioned limits to Nirav Modi group firms had started,” a CBI spokesman said, referring to Jindal.

Jindal is in custody and was expected to appear in court on Wednesday (Feb. 21). Modi and Choksi’s groups had no comment.

Shares in PNB, which have lost more than a quarter of their market value since the scandal became public, were up 1 percent in early trading on Wednesday.