China on Monday said Hong Kong was free to accept India’s request to arrest jeweller Nirav Modi on the basis of the local laws of the region and judicial agreements between the two, PTI reported. While Hong Kong is part of the People’s Republic of China, it is an autonomous region with its own laws.

On March 23, India’s Ministry of External Affairs had requested authorities in Hong Kong to arrest Modi in connection with the alleged fraud of around Rs 13,500 crore from Punjab National Bank. A provisional arrest has to be made before a formal extradition can be requested.

A spokesperson for China’s Foreign Ministry, Geng Shuang, said on Monday that according to “one country, two systems” rules, the laws of the Hong Kong Special Administrative Region and the assistance and authorisation of the Chinese central government, Hong Kong could “make proper arrangements on judicial mutual assistance with other countries”.

On Sunday, a special court of the Central Bureau of Investigation had issued non-bailable warrants agains Modi and his jeweller uncle Mehul Choksi in connection with the scam. Both Modi and Choksi had fled abroad in January, weeks before news of the fraud first emerged in public. They have not yet returned.

In February, the CBI had written to Modi asking him to come to India and cooperate with the investigation, but he had replied that he cannot return as he has a business to take care of abroad. In March, the United States had said it could not confirm whether Modi was in the country after media reports had claimed so.

The Punjab National Bank had informed the Bombay Stock Exchange on February 14 that it had detected “fraudulent and unauthorised transactions” worth Rs 11,380 crore at its Brady House branch in South Mumbai. The bank had revised this figure to Rs 12,703 crore and later to around Rs 13,645 crore.

A few officials at the public sector bank had allegedly issued fraudulent Letters of Undertaking – essentially letters of credit telling others banks that it would meet a customer’s liabilities – to Modi’s companies. Some bank officials have been arrested and are under investigation.