Karnataka Bank latest to disclose ₹84 crore loan fraud involving Gitanjali Gems

In a case separate from the over Rs12,636 crore PNB fraud, Karnataka Bank reported a ₹86.47 crore fraud in fund-based working capital facilities extended to Mehul Choksi’s Gitanjali Gems.

Karnataka Bank Ltd said on Wednesday that it has reported a fraud totaling ₹86.47 crore in loans extended to Gitanjali Gems Ltd.

Karnataka bank said it does not have any letter of undertaking (LoU) exposure to Gitanjali Gems and the loan was extended under consortium arrangements.

“The bank has reported a fraud to Reserve Bank of India amounting to ₹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,” said the bank in a BSE filing late on Wednesday.

However, the bank added that it does not have any letter of undertaking (LoU) exposure to Gitanjali Gems. The loan was extended under consortium arrangements, said the bank.

Karnataka Bank become the latest bank exposed to a wider loan fraud involving Gitanjali Gems and owner Mehul Choksi. Investigative agencies are probing 31 private and state-run banks that in a consortium gave working capital loans worth Rs5,280 crore to Choksi-controlled Gitanjali Gems starting 2009, Mint reported earlier.

This is separate from the Rs12,636 crore Punjab National Bank (PNB) fraud investigation, which involved fake LoUs.