In a matter of a month, Ashok Vihar has gone from a run-of-the-mill neighborhood in India's capital city to the center of a near $1 billion money laundering scandal that is threatening to ensnare some of the country's largest banks.
Bank of Baroda, India's second-largest state-owned bank by assets, has operated a local branch in the area for decades where local shopkeepers and families kept accounts. Now, that branch is being investigated for illegal foreign exchange transactions estimated at as much as 60 billion rupees ($922 million) with the trail of evidence spanning from the Middle East to Latin America.
The Central Bureau of Investigation (CBI), India's main investigating police agency, reckons that 59 account holders at the Ashok Vihar branch and an unknown number of bank officials allegedly conspired to funnel money to 417 partners in Hong Kong and one in the United Arab Emirates under the guise of import payments for cashews, pulses and rice.
Except the food imports didn't exist and the transfers were in violations of India's Foreign Exchange Management Act.
The scandal is a source of embarrassment for Bank of Baroda, which was founded by Maharaja Sayajirao Gaekwad III in 1908 and survived a crisis during the First World War when as many as 87 banks failed in India, and comes at an uncomfortable time for the central government that has seen some of its popularity dented by stalling of crucial reforms.
Authorities have stepped in, with junior finance minister Jayant Sinha meeting state-run bank chiefs in New Delhi on Wednesday to discuss the matter.
Private banks have been impacted as well, with HDFC Bank—India's second largest private lender—announcing the suspension of an employee in connection with the case last week.