Giving out a stern warning to those involved in the Rs 11,400-crore fraud at one of Punjab National Bank's (PNB) Mumbai branches, the Centre on Thursday, said "nobody, irrespective of their status or stature, shall be spared".
"In the last 123 years, we have seen many ups and down".
"This could subject PNB to significant potential impairments", he wrote, adding this could increase the bank's capital requirement by 80 billion rupees ($1.25 billion).
"They have to bite the bullet and take on bureaucrats and the bank employee unions and actually fix banks' governance or India will struggle to maintain its growth projections".
PNB has also suspended 10 of its officials in connection with the case.
Based on the complaint, the Central Bureau of Investigation (CBI) registered a preliminary case against the companies and the people named on January 31 and PNB said a detailed probe was underway. PC Jeweller CFO however clarified stance and said the firm is not related to the case in any way.
While the government desperately tried to explain the situation, a potentially more disturbing revelation has come to light. One of the fraud officials who helped Nirav get the LoUs had retired.
He added that Nirav Modi did not meet Prime Minister Narendra Modi at Davos. The transaction request was routed through SWIFT, the global financial messaging service, instead of the core banking system (CBS) as a result the higher authorities were unsuspected of the scam.
Banking sources have said in some banks the SWIFT system, which is used for worldwide transactions, and the core banking system work independently of each other. On why the fraud went unnoticed for seven years, Kumar said it is a "systemic issue" and has to be looked into.
PNB fraud case: Congress accuses of PM letting 'Chhota Modi' escape
"Guide to Looting India by Nirav MODI. 1".
"There is clear criminal connivance of the group companies of Nirav Modi and Gitanjali Gems with our branch official and also, apparently, with officials of overseas branches of Indian banks", the PNB said in a detailed note sent to 30 Indian nationalised banks, a private bank and a foreign bank.
Addressing the jeweller as "Chhota Modi" in a press conference here, Surjewala said that Nirav was part of a delegation travelling with the prime minister despite "the complaint against him".
The CBI issued the circulars against all the accused on January 31. His sister's daughter, Isheta, is married to Nirav Modi's younger brother, Nishal Modi, who has also been named in the PNB case. His flagship Firestar Diamond has said it had no involvement. Reuters was not immediately able to contact the two staff members.
They searched Modi's residence in Kurla, jewellery boutique in Kala Ghoda area, three company offices in Bandra and Lower Parel in Mumbai, three premises in Surat in Gujarat and Modi's showrooms in Chanakyapuri and Defence Colony in Delhi.
The PNB chief said the finance ministry was taking stock of the matter on a day-to-day basis and would "come down heavily in support of booking the culprits".
PNB has said the transactions are "contingent" in nature, and it will decide on the liability based on the law and the genuineness of underlying transactions.
It signalled that the fraud could affect other banks, which "appear to have advanced money to these customers abroad".
"If it (LoUs) was to get rolled over, it would have got rolled over this time also", he said, adding the next roll over came to notice on January 23.