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Nirav Modi fraud costs PNB Rs 14,357 cr

Wednesday, May 16, 2018

Punjab National Bank said yesterday that its total liability works out to Rs 14,356.84 crore on account of the fraud allegedly carried out by jewellery designer Nirav Modi and associates.

The fraud was detected at PNB's Brady House branch in Mumbai involving certain accounts under 'gems and jewellery' sector wherein, through apparent connivance between "these entities and few employees of the bank", some LoUs/FLCs were issued fraudulently to certain overseas branches of Indian banks through misuse of the SWIFT messaging system.

The fraud allegedly perpetuated through Letters of Undertaking (LoUs)/Foreign Letter of Credit (FLCs) is currently being investigated by different agencies. The CBI yesterday filed its first chargesheet in the matter detailing the roles of Nirav Modi, his brother Nishal Modi and Subhash Parab, an executive in Nirav Modis company. "The liabilities on account of LoUs/FLCs, which became due up to March 31, 2018 amounting to Rs 6,586.11 crore have been paid by the bank...," the PNB said in a regulatory filing, while announcing its fourth quarter result.

It further said that as a prudent measure, the bank has created liability in the books in respect of LoUs/FLCs which are becoming due after March 31 amounting to Rs 6,959.79 crore.

"Bank will make payments to the concerned banks on the due dates of LoUs/FLCs.  "After including outstanding amounts under other credit facilities to the above entities, the amount involved now works out to be Rs 14,356.84 crore," PNB said. The Reserve Bank has permitted PNB to make provisions against the fraud amount.

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