 "PNB")
Don't want to miss the best from Business Standard?
Punjab National Bank (PNB) said on Sunday it would honour all bona fide commitments made in the form of letters of undertakings (LoUs) to foreign branches of Indian banks.
“PNB clarifies that we will honour all our bonafide commitments under LoUs and foreign letters of credit (FLCs) as per the law of the land and directions of the Reserve Bank of India (RBI),” the Delhi-based bank, hit by a Rs 114 billion scam, said.
The statement comes a day after the Indian Banks’ Association held a meeting in Mumbai to reconcile claims related to the fraudulent LoUs issued by the two PNB employees, on behalf of a group of companies belonging to Nirav Modi and Mehul Choksi.
Senior PNB executives said the latest statement came after the RBI told PNB to announce publicly that it would pay its liabilities to other banks. “The RBI has told us to issue a statement but not in the form of an advertisement,” the executive added.
The RBI, on Friday, denied reports it had issued instructions to PNB to meet its commitments under LoUs to other banks.
Also Read
A junior-level branch official at PNB had unauthorisedly and fraudulently issued LoUs on behalf of some firms belonging to the Nirav Modi group, such as Solar Exports, Stellar Diamonds, and Diamonds R Us, for availing of buyers’ credit in overseas branches of Indian banks.
A similar modus operandi was used by the same branch official in companies belonging to Gitanjali Gems, which is promoted by Mehul Choksi.
At the time of issuing an FLC for a smaller amount by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the transaction was routed through the core banking system (CBS) system. Subsequently, amendments were made in these FLCs by enhancing the amount of FLC and transmitted through SWIFT without routing the increased amount through CBS.
The PNB had disputed in its complaint to the RBI and investigative agencies that other banks flouted RBI norms on importing pearls and are equally responsible in the fraud.
The affected banks, including Allahabad Bank, have said that PNB is liable for all the fraudulent transactions because the latter issued the LoU. PNB, on the other hand, said foreign branches of Indian banks did not raise an alarm.
Other banks involved in the alleged scam include the Frankfurt and Mauritius branches of State Bank of India, the Bahrain branch of Canara Bank, the Antwerp branch of Bank of India, and the Hong Kong branches of Axis Bank and Allahabad Bank.
Over 150 fraudulent LoUs, worth over Rs 114 billion, were issued by PNB to other banks. The bank has claimed the alleged scam has been going on since 2011.
