NEW DELHI (Reuters) - Indian police questioned a former senior central bank official on Friday about a gold import scheme as part of inquiries into a $2 billion fraud at state-run Punjab National Bank (PNBK.NS), a source familiar with the discussions said.
The source told Reuters that officers from the federal police had been seeking background information from former Reserve Bank of India (RBI) Deputy Governor H.R. Khan on the “80:20 scheme” and that it was “not a grilling exercise”.
In 2013, the RBI and the previous government implemented the 80:20 rule to help rein in a spiraling current account deficit, forcing importers to export at least 20 percent 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 jewelry exports.
Khan, who retired from his post at the RBI in 2016, declined a Reuters request for comment.
However, the source said: “The Central Bureau of Investigation 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 jeweler groups that raised loans from overseas branches of Indian banks using nearly $2 billion of fraudulent guarantees issued by some rogue PNB staffers.
Four senior RBI officials were also quizzed by investigators on Thursday, but sources told Reuters 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.
Reporting by Nigam Prusty and Neha Dasgupta; Writing by Aditya Kalra and Devidutta Tripathy; Editing by Euan Rocha, Catherine Evans and David Stamp