India's Central Bureau of Investigation (CBI) and the Gujarat Anti Terrorist Squad have arrested three promoters of Vadodara-based Diamond Power Infrastructure (DPI) in connection with a US$400 million bank fraud.

The promoters, known as S N Bhatnagar and his sons Amit and Sumit, allegedly obtained credit facilities from several banks that enabled them to obtain letters of credit (L/Cs) that they failed to honour.

Warnings ignored

The company and its directors obtained term loans and credit facilities, despite being named in the Reserve Bank of India's defaulters list and the Export Credit Guarantee Corporation of India's cautionary list at the time.

The CBI alleges that DPI extensively used cash credit limits to obtain several large L/Cs, many of which the company could not honour.

Banks duped

The CBI reckons DPI fraudulently obtained credit facilities from a consortium of eleven public and private banks from 2008, gradually amassing debts of US$400 million by 2016.

India's Income Tax Department is also probing the DPI loan fraud case and has reportedly found that its promoters obtained loans by showing a huge turnover of US$53 million through bogus intra-group transactions.

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