The Punjab National Bank (PNB) will take “full-capacity” action against the wrong doers in the Rs 11,400-crore Nirav Modi fraud case, which started in 2011, the bank management said in a presser on Thursday. In what could be the biggest banking fraud in India, billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.
Nirav Modi is currently reported to be out of India.
The state-owned bank has already suspended 10 officers over the scam and referred the matter to the CBI for investigations. The Enforcement Directorate (ED) too launched several raids at various places associated with the well-known jewellery designer.
PNB CMD Sunil Mehta told reporters that the bank detected the fraud and has referred the matter to the law enforcement agencies. “In the last 123 years, we have seen many ups and down. The bank at its full capacity will take every action to book wrongdoers”.
“This fraud had started in 2011. Our own bank detected first and told the law enforcement agencies about this. PNB is fully committed to its clean banking policy. That is why we are the first one to detect and report this to the various law enforcement agencies,” he said.
Mehta tried to assure stakeholders saying that it was a standalone incident confined to a single branch in Mumbai. He also said all other branches of the bank have been scanned to check any fraudulent activity.
The PNB CMD further said the bank has informed all its lenders about case.
“We have issued advisory as well to them. We were the first to inform SEBI about this under the disclosure norms. So all these things are as per our clean banking agenda,” Mehta added.
He further said the government was monitoring the case on day-to-day basis. “The bank has the capability and capacity to come out of this situation.”
The top PNB official, however, refrained from providing details as the investigations were going on.
He asserted that action will be taken against all those involved, irrespective of their seniority.
Mehta further said the bank will honour all its bonafide commitments. “We want to convey to all our stakeholders that PNB is pursuing clean banking agenda as a responsible bank.”
However, PNB shares continued to bleed for the second day in a row, ending with a steep loss of 12 per cent at Rs 128.35 apiece on BSE.
Earlier, 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 the press.
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 the CBI and ED looking at their arrangements with various banks and end use of money, a senior official of a public sector bank told the news agencies.
Last week, PNB had lodged an FIR with the CBI stating that fraudulent LoUs worth Rs 280.7 crore were first issued on January 16. At the time, PNB had said it was digging into records to examine the magnitude of the fraud.
(With inputs from PTI)