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The Country’s second-biggest public sector bank, Punjab National Bank (PNB) on Wednesday opened many eyes with the disclosure that it has detected some "fraudulent and unauthorised" transactions worth a staggering about Rs 11,300 crore in one branch of Mumbai.
It was noticed that the value of the fraudulent transactions works out to more than 8 times PNB's annual net profit of Rs 1,324 crore during 2016-17.
The bank said in a regulatory filing with the BSE that the transactions were "for the benefit of a few select account holders with their apparent connivance" and that “based on these transactions other banks appear to have advanced money to these customers abroad.”
PNB did not name the people involved but said it had reported the deals to law enforcement agencies and would evaluate later whether it faces any liability arising out of the transactions.
The matter has been referred to law enforcement agencies to examine the case and book the culprits, the bank statement added. "These transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions," PNB said, without giving further details.
However, sources disclose that PNB has lodged a complaint with the CBI against billionaire jeweller Nirav Modi and a jewellery company over fraudulent transactions worth Rs 11,300 crore. The premier investigating agency is reported to have received the complaints about the transactions detected by the public sector bank late on Tuesday night. Modi is already being investigated by the CBI on a complaint from the Punjab National Bank filed last week over a $44 million (Rs 283 crore) fraud.
This is the second incident of fraud in less than 10 days involving the same person being reported to the CBI. Nirav Modi figured in Forbes India's Richest People List 2016, with a net worth of $1.74 billion. Jolted into action by the Rs 11,300 crore fraud at PNB, the finance ministry has set a oneweek deadline for all banks to send reports involving this case or other such incidents latest. Since more than one lender is involved, all banks have been asked by the finance ministry's department of financial services to submit a status report soon on the fraud, a senior official confirmed. He said the ``letter of undertaking'' was issued fraudulently by PNB to billionaire diamond merchant Nirav Modi and associates and was encashed overseas by them from different banks, both in the private as well as public sector. Union Bank of India, Allahabad Bank and Axis Bank are reported to have offered credit based on letters of undertaking (LOUs) issued by PNB.
An LOU is in effect a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. Foreign branches of these banks which have dealings with outlets of a jewellery company are understood to have taken significant exposures. All this was being carried out in connivance with PNB officials including a deputy general manager since 2011, sources added.
PNB has suspended 10 employees in connection with the fraud. The finance ministry has also asked, through the reform agenda circulated to the banks on January 24, that dubious accounts should be scrutinised and appropriate action against fraudsters be taken with zero tolerance. Banks should not dither from taking action against their own employees in case of collusion if there is sufficient ground, the directions added.
(With agency inputs)