Published: Thu, March 15, 2018
World | By Melba Underwood

PNB fraud: CBI adds criminal breach of trust charge to FIR

PNB fraud: CBI adds criminal breach of trust charge to FIR

Ajay Sahai, Director General of exporters' body Fieo said that the RBI decision should have very little impact on trade as bank guarantee and letter of credit continue to be available.

As PNB bank credit fraud of Nirav Modi swelled to huge proportions RBI has put a ceiling on bank credits - barred all lenders from issuing letters of the undertaking - a form of credit guarantee at the heart of a major fraud of PNB.

As per the RBI's latest notification, Letters of Credit and bank guarantees for trade credits can continue to be issued.

The instruments are all forms of trade finance often used by importers to fund their overseas purchases. Guarantees and letters of credit require banks to conduct their own credit appraisal on companies they are giving credit to, thus reducing the risk of default.

Bankers said letters of credit involved more paperwork and the due diligence was more stringent than letters of undertaking.

The sector also got a boost on news that Bank of India recovered about 70 billion rupees ($1.08 billion) that had earlier been categorized as bad loans.

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The bank has also filed criminal complaints with CBI and the ED, both of which launched nationwide searches on dozens of offices and residences of the alleged fraudsters.The bank has named Modi's brother, his American wife Ami, and uncle Choksi besides some others in the FIR.

Mumbai The scam size of Punjab National Bank is over the Rs 12700 crore that the bank has so far claimed.

A man leaves an automated teller machine (ATM) facility of Punjab National Bank (PNB) in New Delhi, India, February 27, 2018.

Ever since the fraud came to light, PNB, RBI and the Government have been wrangling with the issue of how to settle the liabilities arising out of this fraud.

Banking sources, however, said such an agreement was not yet a done deal. It additionally fills the need of a bank ensure for a bank's client for making installment to seaward providers in outside cash. As an after effect, bank stocks were under pressure on Wednesday morning with the Nifty PSU Bank sub-index tanking nearly 2 per cent in the initial half hour of trading.

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