India's Punjab National Bank agreed to pay 65 billion rupees to honor an initial tranche of claims in connection with a nearly US$2 billion fraud case, Reuters reported.

Junior officials at a Punjab National Bank branch allegedly extended fraudulent loans to billionaire jeweler Nirav Modi and Mehul Choksi between 2011 and 2017. The case came to light in February when Punjab National Bank issued a disclosure.

The Indian bank's board on March 28 approved payment over the fraudulent guarantees, which were due by the end of March, to seven banks. The bank added that it will honor any maturing guarantees when they are due.

The banks, the Indian government and the central bank were in talks over the claims and had sought to settle the dispute before the end of the fiscal year on March 31.

Punjab National Bank is moving to "quickly" resolve the dispute before the end of the month, Reuters quoted a "source with direct knowledge of the talks" as saying. The source said the bank is sufficiently capitalized to make full repayment to the counterparty banks.

The fraudulent guarantees are due between January and April this year, Reuters said, citing police and court documents.

As of March 28, US$1 was equivalent to 65.16 Indian rupees.