New Delhi: The government and the Reserve Bank of India (RBI) have not asked Punjab National Bank (PNB) to settle dues with other banks arising from the Rs11,400 crore fraud, the lender said in a statement.
“There are reports in the media that RBI/government has asked the bank to make payment of the fraudulent amount to other banks. The report is totally incorrect and the bank confirms not having received any such instructions,” PNB said.
On 14 February, PNB informed the stock exchanges that it had uncovered a massive fraud in one its Mumbai branches. The fraud involved group firms of jewellers Nirav Modi and Mehul Choksi and also a few bank officials. The modus operandi involved bank officials issuing letters of undertaking (LoUs) to these firms which enabled them to borrow from international branches of banks to pay their import bills.
However, these LoUs were not recorded in the bank’s books and neither were the amounts borrowed used to pay the import bills, leading to suspicions of money laundering and violations under the Foreign Exchange Management Act.
From the time the PNB fraud broke out, there has been a dispute over who will make good the funds borrowed by Modi and Choksi’s firms against the LoUs.
While PNB has maintained that it will honour its bona fide commitments, it is also of the view that other banks failed in their due diligence and gave loans to Modi without cross checking with PNB about the veracity of LoUs as well as checking the end use of the loans.
However, other banks, including Allahabad Bank, have contested this view and insist that PNB should honour its LoUs.
Over the last couple of weeks, the affected banks have had meetings to come up with a solution. But there has been no headway so far.
“The bank has already initiated prompt steps for protecting the financial interest of all the lenders/stakeholders including issuance of advisory to lenders involved, and to act swiftly to recover the dues,” the PNB statement said, adding that it has initiated strong action against the entities and staff involved.
PNB denied news reports of engaging PwC to conduct an investigation into the alleged fraud and gathering evidence that can be used against Nirav Modi and his associates in court.
It also denied reports of capping withdrawals at Rs3,000 for customers and clarified that Indian cricket captain Virat Kohli continues to be its brand ambassadorlivemint