PNB fraud: CEO Sunil Mehta says will honour bonafide commitments
New Delhi: Fraud-hit Punjab National Bank (PNB) Thursday said it will honour its “bonafide commitments” but stopped short of accepting the entire liability of the nearly Rs11,400 crore fraud, pointing out that the matter is under investigation.
It also assured that the fraud was confined to only one of its branches and not widespread.
The PNB fraud pertains to issuance of fake letters of understanding (LoU) to companies associated with billionaire jeweller Nirav Modi by errant PNB employees, which enabled these companies to raise buyer’s credit from international branches of other state-run banks.
Modi is already being investigated by the Central Bureau of Investigation (CBI) in connection with an earlier complaint by the same bank.
“If the investigation process says it is our liability, then we will accept it,” Sunil Mehta, managing director and chief executive officer of the bank said at a press conference.
State-run banks have demanded PNB honour its LoUs, based on which they lent to companies related to Modi.
Mehta said the bank is closely investigating all transactions linked to the employees who have been named in the first information report (FIR) filed with CBI.
On Thursday, PNB also disclosed that it has a credit exposure of Rs1,700 crore to two groups named in the FIR. Along with Modi’s wife and brother, Mehul Choksi, managing director of Gitanjali Gems Ltd, has also been named in the fraud.
He said it is premature to talk about legal recourse, but added that PNB has discussed the matter with other lenders in consortium meetings on exposure of banks to the two groups.
When asked how a fraud of this magnitude escaped the notice of auditors, Mehta said these LoUs were issued using the SWIFT messaging system, but without making any corresponding entries in the bank’s books, due to which it escaped notice.
Mehta said Modi has approached the lender with a vague repayment plan, adding the bank has, in turn, asked him to come up with a concrete repayment plan. He added that, with the raids and seizure of assets being carried out, a good portion of the amount could be recovered.
Mehta said that, since the fraud has been detected, there may not be any requirement for a forensic audit, but said the bank will go in for one if required.
On Thursday, PNB shares closed 11.97% lower at Rs128.35 on Thursday on BSE, while the Sensex was up 0.41% at 34,297.47.
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