MUMBAI/NEW DELHI (Reuters) - An official of India's Punjab National Bank PNBK.NS received gold and diamond jewelry from a billionaire jeweler accused of being involved in a $2 billion bank fraud, the federal police told a court on Saturday.

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The state lender in January uncovered the alleged fraud in which several bank officials were suspected of colluding with jeweler Nirav Modi and his uncle Mehul Choksi to issue fraudulent letters of undertakings (LoUs), for their companies to raise loans from overseas branches of mostly Indian banks.

The Central Bureau of Investigation (CBI), which has arrested 14 people in the case, on Saturday for the first time said bribes were paid to at least one Punjab National Bank (PNB)official by Modi.

The agency told the court that Yashwant Joshi, who worked as a manager in the forex department of the Mumbai branch that is at the center of the fraud, admitted to having received two gold coins weighing 60 grams and a pair of gold and diamond earrings from Modi.

The articles have been recovered from Joshi’s house in the presence of independent witnesses, the CBI said.

“This indicates that he was in collusion with the beneficiary accused persons to cheat the bank,” CBI Inspector D. Damodaran said in a court filing. “He also obtained illegal gratification from the beneficiary party for continuing issuance of fraudulent LoUs.”

Joshi, who was committed to judicial custody by the Mumbai court along with four other PNB officials and an associate of Modi, could not be contacted for comment.

Modi and Choksi, who owns Gitanjali Gems Ltd GTGM.NS, left India before the fraud came to light, but have said in letters and statements they were innocent.

PNB, India’s second-biggest state lender, has mainly accused two low-level employees of the Brady House branch of issuing the LoUs without making corresponding entries in the bank’s main software, helping the fraud to go undetected for years.

The CBI, however, has expanded its investigation and arrested two internal auditors of the branch, among others.

Separately, Indian TV channels reported that another Mumbai court on Saturday issued non-bailable warrants against Modi and Choksi following an appeal by the Enforcement Directorate (ED), an Indian agency focused on foreign exchange and money laundering offences.

“Modi appears to be the prima donna in the whole saga of the fraud perpetrated on the PNB,” the directorate said in a filing to the court seen by Reuters.

“The case involves a circuitous web of routes created by the said Modi and in such circumstances, the fraudulent transactions appear to be in the personal knowledge and exclusive domain of Nirav Modi”.

Modi has yet to be tracked by Indian authorities, but the ED said “reportedly, Modi is presently in Hong Kong”. The agency has already seized various properties of Modi and Choksi, as Indian banks assess the hit to them from the fraud.

State Bank of India SBI.NS and two other state-run banks, Union Bank of India UNBK.NS and Allahabad Bank ALBK.NS, are lenders who had extended credit based on the LoUs issued by PNB that were later found to be fraudulent. Allahabad Bank said on Saturday it had a $366.87 million exposure to the case.