`11,300 cr fraud rocks Pun­jab Na­tional Bank

CBI be­gins probe into mega bank scam Jew­eller Ni­rav Modi si­phoned out funds 10 PNB of­fi­cials have been sacked

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STATE-RUN Pun­jab Na­tional Bank (PNB) dropped a bomb­shell on Wed­nes­day with the dis­clo­sure that it has de­tected some “fraud­u­lent and unau­tho­rised” trans­ac­tions worth a stag­ger­ing $1.77 bil­lion (about Rs 11,300 crore) at one of its branches in Mum­bai.

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, the coun­try’s sec­ond-big­gest public sec­tor bank, in its reg­u­la­tory fil­ing 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.

Fi­nance min­istry seeks im­me­di­ate re­port from all banks


PNB shares plunged 10 per cent on Wed­nes­day af­ter the public sec­tor bank dis­closed the de­tec­tion of the fraud.

Other state-run banks were un­der pres­sure, too, and fell by up to 8 per cent af­ter the RBI came out with new norms for recog­nis­ing stressed as­sets.

The stock of PNB set­tled at Rs 145.20 on the NSE, a slump of 10.29 per cent from its pre­vi­ous close.

Dur­ing in­tra-day trade, the scrip touched a low of Rs 145.15. On BSE, the scrip closed 9.81 per cent lower at Rs 145.80.

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