Hit mighty hard by the Nirav Modi scam, Punjab National Bank promised to pay Rs. 6,500 crore to seven banks against the fraud LoUs (Letters of Undertaking) and FLCs (Foreign Letters of Credit). Out of these, around 350 LoUs and FLCs are maturing on March 31. The bank also approved to honour the following LoUs and FLCs when they are due. The fraud involves Jewellers Nirav Modi, Mehul Choksi, and their companies.
Union Bank of India, Allahabad Bank, State Bank of India, Axis Bank among 30 other banks were directly hit by the unauthorized transactions as they had offered credit based on LoUs issued by PNB. UBI’s exposure in PNB fraud is Rs. 1000-2000 crores, Allahabad Bank’s at Rs. 4000 crores, and Axis Bank’s exposure stands at Rs. 2000-3000.
PNB is taking this step to ensure least disturbance in the Indian Banking Industry and make certain that services will work seamlessly in the future. PNB’s non-executive chairman said that PNB stood by its assurance to honour the LoUs and that too in compliance with the law. Thanking the stakeholders for supporting PNB in this hard time, the chairman added that this move will help rebuild trust and constancy in the broader banking system.