PNB to honour LoUs worth Rs 6,500 crore due to lenders

Scam-hit Punjab National Bank(PNB) today said it will honour the controversial Letters of Undertaking(LoU) amounting to Rs 6,500 crore issued fraudulently to seven lenders in the Nirav Modi scam.

Diamond businessman Nirav Modi had connived with PNB officials to get a number of LoUs made in his favour. PNB said it will also honour all subsequent maturing LoUs and FLCs as and when they are due.

A Mumbai branch of PNB had issued as many as 1,590 LoUs fraudulently for the group of companies belonging to Nirav Modi since March 2011. The Rs 13,900 crore scam is being investigated by top officials in the Enforcement Directorate even as the kingpins Nirav Modi and Mehul Chowksi still remain out of reach having fled abroad.

"This will lead to settling of LoUs worth Rs 6,500 crore with 7 banks in relation to the recent fraud that was reported by the bank," PNB said.

The bank also informed that the first phase of SWIFT integration with CBS will become operational from the first working day of the new financial year for the bank, April 3 2018. 

The SWIFT system was repeatedly used by PNB officials involved in the scam to move money into Nirav Modi's business accounts.

"This decision of the board sends out a strong message that PNB takes its obligations seriously but does it in a manner that is compliant with the law," bank chairman Sunil Mehta said.

Meanwhile, a close associate of Nirav Modi Shyam Sunder Wadhwa was arrested by the Enforcement Directorate in a money laundering case under PMLA.