Punjab National Bank on Wednesday decided to clear all other banks’ dues to be paid before March 31 in relation to the Rs 129-billion fraud case.
The decision came after the finance ministry’s meeting on Tuesday with a few bankers, including those from Punjab National Bank, to break the stalemate between banks on the fraud related to fake letters of undertaking issued for group companies of diamantaire Nirav Modi and his uncle Mehul Choksi.
“PNB will honour all the claims due to be paid before March 31 to other banks. The bank's board has been apprised about the same and the bank will start disbursing the liability amount soon,” sources said.
PNB will ask other banks to submit an undertaking that it will refund the money against fake LoUs wherever the involvement of its officials is established by investigative agencies, the source added.
PNB sources said a clarification had come from the finance ministry to discharge all pending dues to banks for the LoUs issued since 2017. They added that PNB had to clear dues worth around Rs 60 billion to other banks, including Union Bank of India, Uco Bank and State Bank of India, by March 31.
Through the LoUs, PNB issued an undertaking to these banks that it would repay the amount borrowed by the companies involved in case of any default after a fixed period of time.
The other banks deposited the foreign currency loans in the overseas account of PNB, known as nostro account, which was transferred to the companies dealing with the Nirav Modi and Mehul Choksi group of companies.
PNB had partly passed the blame on foreign branches of Indian banks for lack of due diligence on the fraudulent LoUs. PNB said the LoUs were not issued as per RBI guidelines and other banks did not raise any alarm.
However, the affected banks have said all the LoUs issued by the PNB were genuine and none of their foreign branches violated RBI guidelines as claimed by PNB.
The decision came after the finance ministry’s meeting on Tuesday with a few bankers, including those from Punjab National Bank, to break the stalemate between banks on the fraud related to fake letters of undertaking issued for group companies of diamantaire Nirav Modi and his uncle Mehul Choksi.
“PNB will honour all the claims due to be paid before March 31 to other banks. The bank's board has been apprised about the same and the bank will start disbursing the liability amount soon,” sources said.
PNB will ask other banks to submit an undertaking that it will refund the money against fake LoUs wherever the involvement of its officials is established by investigative agencies, the source added.
PNB sources said a clarification had come from the finance ministry to discharge all pending dues to banks for the LoUs issued since 2017. They added that PNB had to clear dues worth around Rs 60 billion to other banks, including Union Bank of India, Uco Bank and State Bank of India, by March 31.
Through the LoUs, PNB issued an undertaking to these banks that it would repay the amount borrowed by the companies involved in case of any default after a fixed period of time.
The other banks deposited the foreign currency loans in the overseas account of PNB, known as nostro account, which was transferred to the companies dealing with the Nirav Modi and Mehul Choksi group of companies.
PNB had partly passed the blame on foreign branches of Indian banks for lack of due diligence on the fraudulent LoUs. PNB said the LoUs were not issued as per RBI guidelines and other banks did not raise any alarm.
However, the affected banks have said all the LoUs issued by the PNB were genuine and none of their foreign branches violated RBI guidelines as claimed by PNB.
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