India's Central Bureau of Investigation (CBI) has filed suits against two Mumbai based jewellery dealers who may have conspired with bank officials to cause losses of around US$230 million to several banks.

The CBI says it is probing the role of bank officials in this alleged fraud.

Failed L/C obligations

According to the CBI, several banks in India opened standby letters of credit (L/Cs) for gold imports by Winsome Diamond Jewellery and Forever Precious Jewellery. Gold shipped to them in India was then was re-exported to 13 UAE-based buyers.

But the companies failed to meet their L/C obligations, forcing the Indian banks to make payments to foreign banks.

Losses

CBI incurred the largest loss of US$105 million in one case and US$38 million in another.

IDBI Bank Ltd incurred a US$20 million loss in one case and US$8.4 million in another. Vijaya Bank incurred a US$35 million loss in one case and US$23 million in another.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.