You are here: Home » Finance » News » Banks
Business Standard

PNB reiterates: Will honour all bona fide commitments to other banks

The RBI, on Friday, denied reports it had issued instructions to PNB to meet its commitments under LoUs to other banks

Somesh Jha  |  New Delhi 

File photo: Reuters

(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

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 (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 employees, on behalf of a group of companies belonging to and

Senior executives said the latest statement came after the RBI told PNB to announce publicly that it would pay its liabilities to other “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

A junior-level branch official at PNB had unauthorisedly and fraudulently issued LoUs on behalf of some firms belonging to the 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

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 and

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.

First Published: Mon, February 19 2018. 06:58 IST