Internal report blames procedural lapses, officials involvement for PNB fraud

An internal enquiry by scam-hit PNB has found that the Rs 14,000-crore fraud perpetrated by Nirav Modi took place with the help of some officials of the bank's Brady House branch in Mumbai and also due to procedural lapses.

According to sources, the internal enquiry completed before handing over case to investigative agencies alleged that a group of employees at the Brady House branch issued fake letter of undertaking over several years to help Nirav Modi and his uncle Mehul Choksi raise billions of dollars in foreign credit, leading to country's biggest-ever bank fraud.

Over 200 pages internal report also alleged procedural lapses at several levels that go far beyond India and some of the branches of other state-owned lenders, sources said.

The report was presented along with internal e-mails as part of the evidence to investigative agencies.

The bank reported a loss of Rs 13,416.91 crore for the January-March period as against standalone profit of Rs 261.90 crore in the fourth quarter of the preceding fiscal, 2016-17.

With regards to provision made for the loss incurred on account of Nirav Modi fraud, the bank said it provided for Rs 7,178 crore, 50 per cent of the total amount of Rs 14,356 crore in the fourth quarter of 2017-18. The remaining amount will be covered in the three quarters of the current fiscal year.

PNB further said it has paid Rs 6,586.11 crore to other banks to discharge its liabilities towards Letter of Undertakings (LoUs) and Foreign Letter of Credits (FLCs) issued fraudulently and in unauthorised manner to certain overseas branches of Indian banks through the misuse of SWIFT system of the bank, which was then not integrated with CBS (core banking solutions).

Modi and his associates in connivance with some officials of PNB defrauded the bank of over USD 2 billion.