Finance Ministry asks all banks to present status report
New Delhi: The Finance Ministry has asked all banks to present a status report as soon as possible following reports of state-owned Punjab National Bank detecting a USD 1.77 billion scam. This could be the biggest banking fraud in India as its quantum was bigger than an estimated 9,000 crore scam at erstwhile Satyam computers. The Finance Ministry has also issued a strict instruction to all banks saying that no big fish should go scot-free and no honest borrower is harassed. PNB in a regulatory filing yesterday said, “The Bank has detected some fraudulent and unauthorised transactions in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance.” “Based on these transactions other banks appear to have advanced money to these customers abroad,” it added. While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on letters of undertaking (LOUs) issued by PNB. An LOU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers. Foreign bank branches too are under investigation. PNB has suspended 10 officers over the USD 1.77 billion (about Rs 11,400 crore) scam and referred the matter to CBI for investigation. Financial Services Secretary Rajiv Kumar has however said that this seems to be an isolated case and is not going to impact other lenders. Talking to news agency PTI he said, “The finance ministry has taken proactive steps by asking the lender to report the matter to CBI and Enforcement Directorate (ED) so that action can be taken quickly.” Meanwhile, the CBI has received two complaints from the PNB against billionaire diamantaire Nirav Modi and a jewellery company alleging fraudulent transactions. Modi, whose jewellery creations are popular among global celebrities, may face a fresh CBI probe as the agency is looking at suitable legal action to be taken in the case. He is already being investigated by the CBI for alleged cheating and fraud involving Rs 280 crore at a PNB branch.