(Updates with court allowing police custody for arrested people)
MUMBAI/NEW DELHI, Feb 21 (Reuters) - An Indian court on Wednesday remanded six people including a general manager at state-run Punjab National Bank (PNB) in police custody for nearly two weeks, after the latest arrests in a probe into an alleged $1.8 billion fraud.
Among those arrested by the Central Bureau of Investigation (CBI) was Rajesh Jindal, currently a general manager with the bank, who between August 2009 and May 2011 ran the Mumbai branch at the centre of the biggest fraud in Indian banking history.
Five executives from companies run by billionaire jeweller Nirav Modi and his uncle Mehul Choksi, who heads Gitanjali Gems , were also arrested on Tuesday.
They were presented before a Mumbai court, which allowed a police request to keep them in custody until March 5 for further questioning. The five executives included Vipul Ambani, the finance chief of Modi's flagship Firestar group of companies.
Jindal is the highest ranking PNB executive to have been arrested so far in the case, which has also led to the detention of five other employees of the bank, including two branch officials it accuses of colluding with executives from Modi and Choksi's companies to help them obtain fraudulent loans.
A lawyer for Modi, who runs eponymous high-end diamond jewellery stores that spread from New York to Beijing, has denied any wrongdoing by his client. Choksi has not commented on the case but Gitanjali, in a stock exchange filing, has denied his involvement in the alleged fraud.
The bank has alleged that as far back as 2011, firms tied to the pair began receiving fraudulent letters of undertaking (LOUs) from its Brady House branch in Mumbai that enabled them to borrow money from overseas banks.
"During his tenure at PNB Brady House branch, the practice of issuance of LOUs without sanctioned limits to Nirav Modi group firms had started," a CBI spokesman said, referring to Jindal.
It was not immediately possible for Reuters to reach Jindal, Ambani and the other executives who are in custody, or their lawyers.
Punjab National Bank has not commented on the arrests since it triggered the inquiry with a complaint to federal police.
Shares in PNB, which have lost more than a quarter of their market value since the $1.8 billion fraud came to light last Wednesday, closed 0.6 percent higher. Gitanjali shares fell 9.9 percent to an all-time closing low of 27.40 rupees.
"NEAR FUTURE IS UNCERTAIN"
Modi, who police say left India with his family in January before PNB filed a complaint, wrote to his employees in India saying they should look for other jobs as he would not be able to pay them after the seizure of his assets and freezing of bank accounts, local media reported on Wednesday.
"The near future is uncertain," Hindustan Times daily quoted Modi, who was worth $1.8 billion last year according to the Forbes rich list, as writing in the email to employees.
"I hope that we will be able to re-associate ourselves in better days. But, I make it clear that I am committed to pay your past dues, if any, once I have access to stocks and the bank accounts," Modi wrote in the email, according to the newspaper.
In an earlier letter to PNB, a copy of which was seen by Reuters, Modi had said that his companies owed the bank less than 50 billion rupees ($775.3 million), much lower than the amount alleged by the bank. He also said PNB had jeopardized its chances of recovering the sums owed by going public with its allegations.
Modi's stores in New Delhi and Mumbai have been closed since investigators raided them and seized stocks last week. His corporate website was also not working on Wednesday.
The fraud has cast a shadow on the workings of the state-run banks, which dominate lending activities in Asia's third-largest economy. Finance Minister Arun Jaitley on Tuesday decried a "lack of ethics" among sections of Indian business and criticised inadequate oversight by auditors and regulators.
(Reporting by Aditya Kalra and Abhirup Roy; Additional reporting by Suchitra Mohanty and Rajendra Jadhav; Writing by Devidutta Tripathy; Editing by Clarence Fernandez and Alex Richardson)