New Delhi: Punjab National Bank (PNB) has reiterated that the Rs11,400-crore fraud detected last month is a contingent liability for the bank and the liability will be decided by the law of the land.
In a late night filing to the BSE on Thursday, the bank also detailed the events that led to the bank filing complaints against firms promoted by Nirav Modi and Mehul Choksi with investigation agencies. It also added that it has filed a complaint against Chandri Paper and Allied Products Pvt. Ltd for a similar fraud.
The bank said that the partnership firm of the Modi group approached its Brady House, Mumbai branch on 16 January and presented a set of import documents with a request to allow buyers’ credit for making payment to overseas suppliers.
Since there was no sanctioned limit in the name of the above firms, the branch officials asked the firms to furnish at least 100% cash margin for issuing letters of undertaking (LoUs) for raising buyers’ credit.
The firms said they have been availing such transactions since past several years following which the bank scrutinized its books and found that the LoUs had been made by branch officials through the SWIFT (The Society for Worldwide Interbank Financial Telecommunication) system without making any entries in the core banking system.
Further, it found that it was issued without any documents of import or approvals from the competent authority.
“The bank held a series of meetings with representatives of Nirav Modi group and Gitanjali Group at Delhi and Mumbai asking them impress upon them to pay the amount. They were also directed to provide all necessary documents as per law to ensure that the imports are bonafide trade transactions," the bank said in its stock exchange filing.
The bank went on to file a fraud report with the Reserve Bank of India (RBI) and a criminal complaint with the Central Bureau of Investigation (CBI) on 29 January after “confirming the first maturity of LoUs liabilities on 25.01.2018 as fraudulently credit against the bank".
While the maturing LoUs amounted to Rs280 crore in the Modi case in the first instance, followed by another Rs379 crore of LoUs, another set of LoUs issued for Gitanjali Group of companies amounting to Rs65 crore matured on 9 February, following which the bank followed a similar process of filing reports with the RBI and the CBI.
The bank suspended 10 of its employees and sought documents from foreign branches of banks, including Allahabad Bank and Axis Bank.
Meanwhile, on 12 February, on the basis of the investigation report, the total fraud of Rs11,394.02 crore was unearthed in the case of “unauthorized issuance of letters of undertakings, foreign letter of credits and inland letter of guarantees in the group accounts of Nirav Modi Group and M/s Gitanjali Group and in the account of M/s. Chandri Paper and Allied Products Pvt. Ltd".
On 13 February, it filed FIRs with CBI and a complaint with Enforcement Directorate against Modi group, Gitanjali Group and Chandri Paper and Allied Products and then informed the stock exchanges on 14 February.