Punjab National Bank (PNB) Managing Director and Chief Executive Officer (CEO) Sunil Mehta on Thursday broke his silence on the Rs 114-billion alleged scam involving diamond merchant Nirav Modi and his maternal uncle Mehul Chinubhai Choksi, saying the public sector bank (PSB) would honour all genuine commitments to other banks.
The PNB chief also said Modi had come out with “vague offers” to repay the amounts due and had not submitted a concrete plan. He added the total exposure of the bank to the two groups of companies involved was around Rs 1.7 billion.
“We will come out of the present situation. We are in discussions with stakeholders, including other banks that are party to this development. We will resolve it and honour all bona fide commitments with other banks,” Mehta said, during a press conference a day after the country’s second-largest PSB made public that it had detected fraudulent and unauthorised transactions.
The PNB chief, however, dodged a query on whether the bank would be liable to pay up the entire Rs 114 billion detected in the fraudulent transactions that took place using the international financial communication system, SWIFT, bypassing the bank’s core banking system with the help of bank staff at a Mumbai PNB branch.
“We are in discussions with all the lenders. It will be decided after the investigation.
If the entire onus is on us we are not going back on it, but nobody else can be a beneficiary of this also,” Mehta said.
The Central Board of Investigation and Enforcement Directorate are investigating the case on the basis of complaints filed by PNB.
On Wednesday, executives at other banks said the liability arising from the fraud would have to be met by PNB since the payment request to overseas branches of banks, including Allahabad Bank, Axis Bank, and Union Bank of India, was raised by PNB. Allahabad Bank CEO Usha Ananthasubramanian had said the entire exposure was on PNB and did not relate to the client, in this case Modi, Choksi and others.
In a letter to 30 banks earlier this week, PNB partly passed on the blame for the fraud on to foreign branches of Indians banks, saying they had also violated Reserve Bank of India guidelines and bank executives of other banks might also be in connivance with group companies of Nirav Modi and Gitanjali Gems, promoted by Choksi.
In the press conference, the PNB chief admitted that the bank would fully provide for Rs 114 billion, equivalent to one-third of the bank’s market capitalisation. He, however, added, “There is no funded exposure right now. Whatsoever is our liability… that is being worked out during the process, and we will take it forward.”
“Our bank has the capability and the capacity to come out of this situation,” Mehta said.
He said along with the foreign branches of Indian banks, a foreign lender was also involved in “one case”. PNB had held meetings with a “consortium” of a “large number of banks” involved in the alleged scam, he added.
Emphasising the fact that the fraudulent transactions had been taking place since 2011, Mehta maintained that it was a standalone case involving only one of its branches. “We have scanned all our branches and this is a standalone case in one of our branches. We have found no wrongdoing in the other branches,” he said.
Mehta said the bank was already in recovery mode and was trying to “protect the financial interests of all the lenders”. The PNB chief added that he had received a mail communiqué from Nirav Modi last week who told the bank that he would come up with a plan. “We have requested him to come personally and submit a plan in writing for repayment,” Mehta added.
The PNB chief also said Modi had come out with “vague offers” to repay the amounts due and had not submitted a concrete plan. He added the total exposure of the bank to the two groups of companies involved was around Rs 1.7 billion.
“We will come out of the present situation. We are in discussions with stakeholders, including other banks that are party to this development. We will resolve it and honour all bona fide commitments with other banks,” Mehta said, during a press conference a day after the country’s second-largest PSB made public that it had detected fraudulent and unauthorised transactions.
The PNB chief, however, dodged a query on whether the bank would be liable to pay up the entire Rs 114 billion detected in the fraudulent transactions that took place using the international financial communication system, SWIFT, bypassing the bank’s core banking system with the help of bank staff at a Mumbai PNB branch.
“We are in discussions with all the lenders. It will be decided after the investigation.
If the entire onus is on us we are not going back on it, but nobody else can be a beneficiary of this also,” Mehta said.
The Central Board of Investigation and Enforcement Directorate are investigating the case on the basis of complaints filed by PNB.
On Wednesday, executives at other banks said the liability arising from the fraud would have to be met by PNB since the payment request to overseas branches of banks, including Allahabad Bank, Axis Bank, and Union Bank of India, was raised by PNB. Allahabad Bank CEO Usha Ananthasubramanian had said the entire exposure was on PNB and did not relate to the client, in this case Modi, Choksi and others.
In a letter to 30 banks earlier this week, PNB partly passed on the blame for the fraud on to foreign branches of Indians banks, saying they had also violated Reserve Bank of India guidelines and bank executives of other banks might also be in connivance with group companies of Nirav Modi and Gitanjali Gems, promoted by Choksi.
In the press conference, the PNB chief admitted that the bank would fully provide for Rs 114 billion, equivalent to one-third of the bank’s market capitalisation. He, however, added, “There is no funded exposure right now. Whatsoever is our liability… that is being worked out during the process, and we will take it forward.”
“Our bank has the capability and the capacity to come out of this situation,” Mehta said.
He said along with the foreign branches of Indian banks, a foreign lender was also involved in “one case”. PNB had held meetings with a “consortium” of a “large number of banks” involved in the alleged scam, he added.
Emphasising the fact that the fraudulent transactions had been taking place since 2011, Mehta maintained that it was a standalone case involving only one of its branches. “We have scanned all our branches and this is a standalone case in one of our branches. We have found no wrongdoing in the other branches,” he said.
Mehta said the bank was already in recovery mode and was trying to “protect the financial interests of all the lenders”. The PNB chief added that he had received a mail communiqué from Nirav Modi last week who told the bank that he would come up with a plan. “We have requested him to come personally and submit a plan in writing for repayment,” Mehta added.
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