Other Indian financial giants may also be affected by the fraud. "The Finance Ministry has taken proactive steps by asking the lender to report the matter to the CBI and the Enforcement Directorate (ED) so that action can be taken quickly", he said.
According to an earlier complaint on which the CBI filed an FIR, Modi, his wife Ami, brother Nishal and business partner Chinubhai Choksi had conspired with officials of the PNB for fraudulent issuance of Letters of Undertakings.
ED would probe if the allegedly defrauded bank funds were laundered and these proceeds of crime were subsequently used by the accused to create illegal assets and black money.
Punjab National Bank's stock sank almost 10% Wednesday after the company said it "detected some fraudulent and unauthorized transactions" at a branch in Mumbai.
The bank, sources said, has now found that the total "unauthorised transactions" by Modi's firms were worth $1,771.7 million. Firms related to Nirav Modi have approached PNB and presented a set of important documents with a request to allow buyers' credit for making payment to overseas suppliers. "The fraud was detected in the third week of January and a case was filed with CBI on January 30", he said.
The fraud unfolded after Nirav Modi's companies sought a fresh loan last month.
The bank alleged that a deputy manager, who has since retired, and another employee had fraudulently issued LOU totalling $4.42 crore, equivalent to Rs 280.70 crore, for the Hong Kong branches of two Indian banks for and on behalf of Diamonds R Us, Solar Exports, Stellar Diamonds. That's when the bank started investigating.
PNB said Nirav Modi had written to the bank but had yet to offer any formal proposal for a repayment.
With current PNB Stock prices, Long term investors can "Hold" the stock with a horizon of more than one year. The bank reported a net worth of Rs 38,096.45 crore for FY 17. The letter further read, "Axis Bank is also an active participant in the secondary market for such transactions, and the bank had sold down all of the referred transactions". However, it could not be immediately ascertained if the two fraud cases have a link. Since they had no pre-arranged credit limit, the branch official asked the companies to put down the full amount as collateral so the bank could issue LOUs to authorise the credit.
How he got involved in the PNB fraud? Earlier in the day, PNB disclosed some fraudulent transactions with financial implication of United States dollars 1.77 billion (about Rs 11,334.4 crore).
Besides, the watchdog and the stock exchanges would analyse trading data of these companies and their top officials, some of whom are already under the scanner for insider trade and other violations, officials said.