Thursday, 15 February 2018

SWIFT and Tripping: How Punjab National Bank's Rs 11,000 cr scam was operated

Punjab National Bank (PNB) is seeing presumably one of the greatest tricks in keeping money history, opening a jar of worms worth over Rs 11,300 crore (USD 1,771.69 million) for the managing an account part.

Deceitful exchanges prone to have been continuing for most recent seven years were uncovered by PNB - the second biggest open part bank and fourth biggest loan specialist by resources – at one of its Mumbai branches.

Remote branches of no less than two Indian banks including Axis Bank and Allahabad Bank are probably going to have been gotten in the misrepresentation with an asserted credit offering given in light of letters of undertaking (LOUs) issued by PNB supposedly towards amass organizations of Nirav Modi and Gitanjali Gems.

These banks are said to have reviewed the advances given in light of the LoUs/FLCs (outside letters of credit) issued on benefit organizations of Gitanjali Gems - Gitanjali Gems, Gili India, Nakshatra - and to Nirav Modi Group firms which incorporate Solar Exports, Stellar Diamonds and Diamonds DU.

Nirav Modi has outside focuses in Hong Kong, Dubai, and New York and has been benefiting purchasers' credit in view of such LOUs from as ahead of schedule as 2010.

How does this work?

Regularly, a LOU is a letter of solace issued by one bank to branches of different banks, in light of which outside branches offer advances or credit to purchasers. For this situation, it is said the remote branches of the previously mentioned banks, which had associations with the outlets of the gems organizations, had given credit against the false LOU/FLC.

A senior PNB official stated, "LOUs are essentially just fallback courses of action. They are not immediate instruments. The LOUs were given through SWIFT innovation and none of the exchanges were directed through its center keeping money arrangements (CBS) to stay away from identification."

As indicated by the official, "Quick resembles a fax which isn't incorporated with the CBS. The concerned firm controlled and utilized this innovation to send the LOU with the assistance of some of our authorities who offered access to the LOU falsely. The credit was then steered by those remote branches to PNB through its Nostro account. The outside bank accepting the message (through SWIFT) while marking down ought to do the due constancy since it doesn't demonstrate a section in our framework when it gets credited. We don't have the foggiest idea about a definitive lawful position. Despite the fact that there is some misutilisation of a portion of the offices from our bank."

One of the authorities of a bank giving the credit stated, "Our credit goes to PNB and not to the organization. In view of the LOU, we have dispatched the sum to the Nostro record of the bank. We have effectively announced the issue to the controllers."

A letter dated February 12 by PNB to 30 banks, as per CNBC TV18 channel, said the extortion was identified on the retirement of the PNB branch official and there is a reasonable criminal intrigue of gathering organizations of Nirav Modi and Gitanjali Gems with PNB branch authorities and furthermore by authorities of abroad branches of Indian banks.

The letter likewise brought up that the RBI stipulated timetable of legitimacy of LOUs for just 90 days from date of shipment was disregarded by abroad branches of Indian banks. The purchasers credit against LOUs were utilized to resign import charges or recharge developing credit.


The Central Bureau of Investigation (CBI) may enlist case in the coming week and after that requirement directorate will likewise take this issue up for facilitate examination.

Sources in the office told Moneycontrol, "In the vast majority of such cases, organization use round stumbling of the sum. For this situation additionally, organization may use round stumbling office which builds the sum esteem however genuine sum included is less as contrast with aggregate sum."

Another source stated, "It is difficult to trust that lesser level officers were approved to endorse such high point of confinement letter of undertaking. Examination office may open up old endorsed records and approved officers may likewise be under the scanner." One previous senior official of PNB holding up to wind up the CEO of another bank is additionally under the scanner of the examination organization.

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