Bengaluru, March 29: Privately-run Karnataka Bank Ltd is the latest to disclose Rs 86 crore loan fraud involving Gitanjali Gems. The bank has informed the Reserve Bank of India (RBI) that scam-hit Mehul Choksi’s Gitanjali Gems had committed a massive fraud in the fund-based working capital. Mangaluru based Karnataka Bank became the latest to expose a wider loan fraud involving Gitanjali Gems and owner Mehul Choksi. 

The scam comes a month after Punjab National Bank (PNB), the second-biggest state-run lender, stunned India’s financial sector by announcing fraudulent transactions worth $1.77 billion (Rs 11,400-crore) at a single branch in Mumbai.

In a regulatory filing, the Mangaluru-based Karnataka Bank on Wednesday said, “The bank has reported a fraud to Reserve Bank of India amounting to Rs 86.47 crore in the fund based working capital facilities extended to Gitanjali Gems Limited on account of non-realization of exports bills and diversion of funds”.

The Bank made it clear that it does not have any letter of undertaking (LoU) exposure to Gitanjali Gems. It added saying that the loan was extended under consortium arrangements. "The working capital facilities were extended by the bank under consortium arrangement and provisions will be made as per the RBI guidelines," the bank's Company Secretary Prasanna Patil said in the filing.

Talking about the PNB Fraud, a recent report by PTI stated that the Bank had witnessed losses to the tune of Rs 2,808 crore on account of frauds in 2016-17, almost a year before it unearthed the mega scam of Rs 12,646 crore. The scam was allegedly perpetrated by billionaire diamond jewellers Nirav Modi and Mehul Choksi.

Union Finance Minister Arun Jaitley had informed the Lok Sabha earlier this month said that Punjab National Bank encountered 158 such cases that caused loss of Rs 2,808.27 crore to the bank. In 18 of these cases, employees from PNB were also involved in perpetrating the fraud. Country's largest lender SBI had reported to be hit by fraud of Rs 2,422 crore in 544 cases, out of which 83 were cases in which bank employees were also involved. Reports state that collectively, all the 27 public sector banks (PSBs) --when the five associate banks of SBI and Bharatiya Mahila Bank were not amalgamated with State Bank of India (SBI)-- had incurred losses of Rs 19,533 crore in 2016-17.

(The above story first appeared on LatestLY on Mar 29, 2018 04:25 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).