PNB Agrees To Honour All LoUs In Nirav Modi Case
PNB says it will repay all LoUs and foreign letters of credit in Nirav Modi scam.
Punjab National Bank will honour all letters of undertaking in the Nirav Modi case.
The board has decided that in all 352 LoUs and foreign letters of credit (FLCs) worth Rs 6,500 crore maturing with seven banks on or before March 31 will be honoured, PNB said in a statement today. The bank will also honour all subsequent LoUs and FLCs as and when they mature, the statement added. Besides, the board has approved ending all inter-bank disputes on fraudulent letters.
The Nirav Modi fraud case came to light early March when PNB told the stock exchanges and the Central Bureau of Investigation that some of its employees had connived with people belonging to companies owned by Modi and his uncle, Mehul Choksi, to issue fraudulent LoUs to receive buyer’s credit from foreign branches of other Indian banks.
According to the bank, the people involved had managed to do this by sending out fraudulent messages through the SWIFT network, which other banks interpreted as approval from PNB. The state-owned lender said that this activity had been going on since 2011 and it just found out about it. Since the bank’s core banking system was not connected to its SWIFT network, it was not able to reconcile any transactions that were taking place.
At the time, other banks had asked PNB to repay all dues. PNB had said that it would repay all “bonafide” claims, without clarifying what it considered bonafide.
“From the beginning when the fraud was detected and reported to the authorities by Punjab National Bank, the bank had communicated that it has a strong balance sheet to meet any contingent liabilities upon the bank,” PNB said in its statement today.
The bank’s board also said it has reviewed the progress made on strengthening the SWIFT operating environment in the bank. “The first phase of SWIFT integration with CBS will become operational from the first working day of the new financial year for the bank, April 3, 2018,” the statement added.
The bank is upgrading its CBS from Finacle 7 to Finacle 10, which will give it better control over all transactions across the lender’s 7,000 branches.
“The board and the management is taking every possible step to restore morale, motivation and pride back to all its 70,000 employees. The bank is not afraid of taking tough action where required. At the same time, the bank is committed to build a strong partnership for customer service and excellence,” the PNB board said.