Money-Advice-Trust

POLICE in India questioned a former senior central bank official last Friday (6) about a gold import scheme as part of inquiries into a $2 billion (£1.41bn) fraud at state-run Punjab National Bank (PNB), a source famil­iar with the discussions said.  

The source said officers from the federal police had been seeking back­ground information from former Re­serve Bank of India (RBI) deputy gov­ernor HR Khan on the “80:20 scheme” and it was “not a grilling exercise”.  

In 2013, the RBI and the previous government implemented the 80:20 rule to help rein in a spiralling current account deficit, forcing importers to export at least 20 per cent of the gold that they brought into the country. The restrictions were later eased as the deficit narrowed and the scarcity of gold hit India’s jewellery exports.  

Khan, who retired from the RBI in 2016, declined to comment.  

However, the source said: “The Central Bureau of Investigation (CBI) wanted to understand the back­ground of the 80:20 scheme, why it was relaxed and on what basis trading houses were chosen to import gold.”  

Earlier, a government source said that Khan had been questioned but declined to give any further details.  

It is not immediately clear why in­vestigators believe there is a connec­tion between that scheme and the PNB fraud. This was allegedly perpe­trated over a period of years by two jeweller groups that raised loans from overseas branches of Indian banks, using nearly $2bn of fraudulent guar­antees issued by rogue PNB staffers.  

Four senior RBI officials were also quizzed by investigators last Thurs­day (5), but sources said they were not suspected of wrongdoing either, and had been called on to explain how banking processes work.  

Police have also quizzed PNB and other bank officials, and made at least 20 arrests in the case that came to light in early February. PNB has said it is working with police and regula­tors in the investigation.