PNB detects $1.77 bn fraud

In what could be the biggest banking fraud in India, state-owned Punjab National Bank said it has detected a USD 1.77 billion scam in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.

PNB has suspended 10 officers over the USD 1.77 billion (about Rs 11,400 crore) scam and referred the matter to CBI for investigation.

Financial Services Secretary Rajiv Kumar said this seems to be an isolated case and is not going to impact other lenders.

“The finance ministry has taken proactive steps by asking the lender to report the matter to CBI and Enforcement Directorate (ED) so that action can be taken quickly,” he told.

“The Bank has detected some fraudulent and unauthorised transactions in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance,” India’s second-biggest state-run bank said.

“Based on these transactions other banks appear to have advanced money to these customers abroad.”

While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on letters of undertaking (LOUs) issued by PNB.

An LOU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.

(Agencies)

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