Four senior Indian central bank officials have been called on by investigators to help explain banking processes as police probe deeper into the $2 billion fraud at India’s Punjab National Bank, sources familiar with the matter said on Thursday.
A federal police source said earlier on Thursday the agency was questioning four top Reserve Bank of India (RBI) officials — three chief general managers and a general manager — in relation with the fraud at state-run PNB, but the source did not elaborate on the line of questioning.
Two other sources, privy to the RBI officials’ meetings with investigators, said the central bank officials were being called upon to explain how banking processes work and that there was no suspicion of any wrongdoing on their part.
The RBI could not be immediately reached for comment.
In what has been dubbed the biggest fraud in India’s banking history, two jeweller groups have been accused of defrauding banks by raising loans from overseas branches of Indian lenders using nearly $2 billion of fraudulent guarantees issued by rogue Punjab National Bank staff at a Mumbai branch.
PNB has said it is working with investigative agencies and regulators in the probe, in which authorities have so far arrested 20 people including executives from the state-run bank.
The RBI has faced criticism that it failed to detect the long-running fraud, or correct a breakdown of normal practices at the nation’s second-largest state-run bank.
The regulator, however, has argued that it had “very limited authority” over state-run banks and called for reforms to give the RBI more powers to police such lenders.
In a strongly worded speech last month, RBI Governor Urjit Patel said there were numerous limitations in the RBI’s powers over state-run lenders, such as its inability to remove directors, or replace management.
While the RBI regulates all banks in India, state-run banks are also regulated by the government, which owns majority-stakes in them.
