BoI executive director K Gopalkrishnan was not available for comments. However, sources in BoI told The Financial Express that the bank had submitted a report to the CBI in May 1998 confirming the fraud in the Jacob Circle branch, in response to the inquiry conducted by the investigating authority.

The two branch managers -- AG Vora and SG Kachara -- who were arrested by the CBI and produced before the chief metropolitan magistrate court (CMM) on October 7 were released on remand. The BoI has suspended both the bank employees.

According to sources in the bank, the fraud came into light in May after the audit of the bankbranch subsequent to which the CBI filed an FIR in the chief metropolitan court, Mumbai, in July.

The two officials in connivance with Ashoke Bansali, the third party accused in the case, allegedly credited cheques aggregating to Rs 80 lakh over five months into the accounts of Ashoke Bansali against unpaid cheques. Ashoke Bansali submitted cheques worth Rs 80 lakh drawn in his favour by his own benami associate company, in his bank account in the Jacob Circle branch.

The bank branch allowed overdraft to the party before clearance of the cheques. The cheques were not cleared as the company issuing the cheques did not have funds in its account and this created debit-credit imbalance in the bank's accounts.

Explaining the modus operandi, sources said prior to the external audits, the bank branch officials created 17 fictitious accounts and transferred Rs 80 lakh into those fictitious accounts and subsequently the amount was transferred into the accounts of a few benami companies of Ashoke Bansali,including Bhairav Metal Industries and Samrat Enterprise.

Once the audit was over, the bank branch transferred the funds from Ashoke Bansali's account into its own account, sources said.