Finance Minister Arun Jaitley on Tuesday said it seems that the management of the Punjab National Bank did not utilise its authority effectively to prevent the Rs 11,380 crore scam the bank reported last week.

“Also, what were the bank’s auditors doing?” Jaitley said at the 41st Annual Meeting of the Association of Development Financing Institutions In Asia and the Pacific, ANI reported. “If both internal and external auditors have looked the other way and failed to detect the fraud, then chartered accountants must introspect.”

The finance minister said agencies involved in banking supervision must also assess the additional mechanisms they have put in place to check fraud.

He said that the banking system depends on trust and on the relationship between the lender and the buyer. “It is incumbent upon the state to chase those who cheat the banking system,” Jaitley added.

The Ministry of Finance on Monday refuted a news report that the Income Tax Department had estimated a Rs 19,317-crore “hit” for Indian banks because of the alleged fraud at Punjab National Bank. The ministry called the report “false and factually incorrect”.

The Central Bureau of Investigation has arrested three officers of Punjab National Bank’s Brady House branch in South Mumbai, where the transactions related to the banking fraud involving billionaire jeweller Nirav Modi had taken place. The agency has also questioned 13 officials of the bank and four employees of Nirav Modi’s jewellery company.

Nirav Modi has been booked for fraud and accused of cheating Punjab National Bank in a Rs 11,380-crore scam. The scam involved bank officials allegedly handing out fake Letters of Understanding on behalf of companies associated with Modi, which allowed him to access massive foreign exchange loans that were completely unsecured.