Home World Business PNB issued 1,213 fake LoUs to Nirav Modi’s firms since March 2011:...

PNB issued 1,213 fake LoUs to Nirav Modi’s firms since March 2011: Jaitley


Executives at PNB’s Brady House branch in Mumbai had started issuing LoUs to foreign branches of Indian banks from March 5, 2011

Somesh Jha  |  New Delhi  Last Updated at March 13, 2018 20:35 IST

The Mumbai branch of had issued as many as 1,213 (LoUs) fraudulently for the group of companies belonging to since March 2011, Minister said in a written reply in the on Tuesday. Executives at PNB’s branch in Mumbai had started issuing to foreign branches of Indian from March 5, 2011, according to details of the alleged scam submitted by the bank, Jaitley said. The first few issued by branch employees, working in connivance with group of companies belonging to Nirav Modi’s firms, were genuine transactions. There were 53 genuine issued by between March 2011 and October 2017, according to the bank. The first fraudulent transaction of the 1,213 fake took place on March 10, 2011. issued 43 fraudulent in 2011, 114 in 2012 and 237 in 2013. The Mumbai branch of stopped issuing for eight months from November 2013. The aggressive commitment of loans by to the accused firms continued from July 2014 with 125 fake issued in 2014, 190 in 2015 and 353 in 2016. While has settled the liability to other Indian for issued till 2016, the Delhi-based bank is yet to clear the dues for issued after 2017. In 2017, issued 150 fraudulent worth around Rs 65 billion for group companies belonging to Besides, there were six genuine worth Rs 1.2 billion in 2017. A LoU is issued by a bank to an importer (in this case Modi).

It works like a bank guarantee, which the importer can sell to other at a discount. The importer receives the money, or letter of credit, and pays his client. The issuer bank messages overseas branches of other through the SWIFT network, and that bank immediately pays the client against the LoU. The bank that holds the LoU then goes back to the issuer bank ( in this case) and recovers its dues. The issuer bank (PNB) recovers its dues against the LoU from its client. Since the are used for importing goods and involve foreign currency, a vostro account (client’s overseas account) is used to deposit the credit by the bank accepting the LoU. received a report of suspicious unauthorised transactions from its Mumbai circle office on January 23 and the bank informed the Reserve Bank of India and lodged a complaint with the on January 29.

First Published: Tue, March 13 2018. 20:34 IST


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