Karnataka Bank Ltd. reported to India's central bank a fraud worth 864.7 million rupees in loans extended to Gitanjali Gems Ltd., the jewelry retailer led by Mehul Choksi already embroiled in the US$2-billion Punjab National Bank fraud case.

The private sector bank said in a March 28 filing that the fraud relates to fund-based working capital facilities extended to Gitanjali Gems Ltd. on account of nonrealization of export bills and diversion of funds. The bank, however, noted that it does not have any exposure in letters of undertaking to the jewelry retailer.

The bank said it extended the loans to Gitanjali Gems under consortium arrangement and that it will make necessary provisions as per guidelines.

Choksi and his nephew Nirav Modi are already facing charges in connection with the Punjab National Bank fraud, which involved the issuance of fraudulent loans by one of the bank's branches in Mumbai to companies linked to the two businessmen.

As of March 29, US$1 was equivalent to 65.07 Indian rupees.