Punjab National Bank cautions other banks about modus operandi of Rs 11,400 crore fraud linked to Nirav Modi case

CBI sources say Nirav Modi, his wife, brother and others worked with bank officials to illegally obtain Letters of Undertaking, which were cashed overseas from different banks, both private and public

Published: 14th February 2018 11:24 PM  |   Last Updated: 15th February 2018 03:11 AM   |  A+A-

A man exits Punjab National Bank's building as a stray dog walks past in Kolkata, May 16, 2017. | Reuters

By PTI

NEW DELHI: Hit by a Rs 11,400 crore fraud, state-owned Punjab National Bank (PNB) has cautioned other banks about the modus operandi of the scam.

"It has been reported through a preliminary investigation that the suspected fraud has been carried out by the perpetrators in collusion with the staff of one of the our branches in Mumbai," PNB said in a letter sent to various banks, including those from the private and public sector as also to foreign lenders.

READ: Punjab National Bank detects Rs 11,360 crore worth fraudulent transactions in Mumbai branch

The letter said it was found through the SWIFT trail that one junior level official unauthorisedly and fraudulently issued Letters of Undertaking (LoUs) on behalf of some companies belonging to Nirav Modi Group.

PNB has suspended 10 officers 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 PTI.

READ: Punjab National Bank files complaint with CBI against Nirav Modi, jewellery company alleging Rs 11,400 crore fraud

"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 in a regulatory filing.

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"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.

Foreign bank branches too are under investigation.

Three other jewellers, Gitanjali, Ginni and Nakshatra are under the scanner with CBI and ED looking at their arrangements with various banks and end use of money, a senior official of a public sector bank told PTI.

The companies were maintaining only current accounts with the branch and none of the transactions were routed though the Centralised Banking System, it said.

Similar modus operandi was used by the same official for companies belonging to Gitanjali Gems promoted by Mehul Choksi.

PNB said that RBI norms were overlooked by overseas branches of other Indian banks and alleged connivance of group companies of Nirav Modi and Gitanjali Gems with its own official and also apparently of others working in foreign branches of Indian banks.

The fraudulent act was found out when subsequent to superannuation of the concerned official, the same companies again approached the branch for availing Letter of Undertakings (LoUs).

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