Shares of twelve PSU banks dropped by 1.81% to 5.65% at 14:41 IST on BSE, with the sentiment taking a hit after the recent $1771.69 million fraud detection by Punjab National Bank at a single branch in Mumbai.
Meanwhile, the S&P BSE Sensex was down 264.77 points or 0.77% at 34,032.70.Bank of Baroda (down 4.84%), State Bank of India (SBI) (down 2.42%), Syndicate Bank (down 2.61%), Dena Bank (down 2.95%), Indian Bank (down 2.59%), Canara Bank (down 2.08%), Union Bank of India (down 2.71%), Bank of India (down 3.34%), Andhra Bank (down 1.81%) and Dena Bank (down 2.95%) declined.
IDBI Bank lost 4.57%. IDBI Bank said it has sold entire 1.20 crore equity shares constituting 30% of the paid up capital of NSDL e-Governance Infrastructure (NEGIL) on 15 February 2018. NEGIL works closely with various Government agencies for designing, managing and implementing e-Governance Projects. The bank made the announcement after market hours yesterday, 15 February 2018.
Punjab National Bank (PNB) lost 5.65%, extending recent losses triggered by the bank detecting a $1771.69 million fraud at a single branch in Mumbai. The stock dropped 11.97% to Rs 128.35 yesterday, 15 February 2018. The stock lost 9.81% to settle at Rs 145.80 on 14 February 2018. PNB made the announcement before trading hours on 14 February 2018. The domestic stock market was shut on 13 February 2018, on account of Mahashivratri.
PNB said that it detected some fraudulent and unauthorised transactions (messages) 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. In the bank these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions. The quantum of such transactions is $1771.69 million (approximately). The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land. The bank said it is committed to clean and transparent banking.
PNB clarified after market hours yesterday, 15 February 2018, that on 16 January 2018, the partnership firm of Nirav Modi group approached PNB branch at Brady House, Mumbai and presented a set of import documents with a request to allow buyers' credit for making payment to the overseas suppliers. Since there was no sanctioned limit in the name of the above firms, the branch officials requested the firms to furnish at least 100% cash margin for issuing Letter of Undertaking (LOU) for raising buyer's credit. On denial, the firms contested that they have been availing such transactions since past several years.
On scrutiny, it was observed that earlier issuance of letter of undertakings (LOU) had been made by the branch officials through SWIFT (The Society for Worldwide Interbank Financial Telecommunication) without obtaining approval of the competent authority, necessary applications from importer, documents of import, legal documentation with bank and also without making entries in bank's trade finance module of CBS system.
Also Read
A series of meetings were held with representatives of Nirav Modi group and Gitanjali group at Delhi and Mumbai to impress upon them to pay the amount. They were also directed to provide all necessary documents as per law to ensure that the imports are bonafide trade transactions.
Upon confirming the first maturity of LOUs liabilities on 25 January 2018 as fraudulently credit against the bank, an FMR-1 (fraud report format of RBI) was submitted to the Reserve Bank of India (RBI) on 29 January 2018 amounting to $44.22 million, equivalent to Rs 280.70 crore (related to 3 group firms of Nirav Modi).
On 29 January 2018, a criminal complaint for registration of FIR against accused persons including the maker & checker employees of the bank for offence of cheating of fraud was filed with Joint Director (Policy), Central Bureau of Investigation (CBI) and same stands registered on 31 January 2018.
On 12 February 2018, based on investigation report, total fraud of Rs 11394.02 crore in case of unauthorized issuance of letters of undertakings, foreign letter of credits and inland letter of guarantees in the group accounts of Nirav Modi Group and Gitanjali Group and in the account of Chandri Paper & Allied Products was reported to RBI. On 13 February 2018, an FIR was filed with CBI against above 2 groups and Chandri Paper & Allied Products. On 13 February 2018, PNB filed a complaint to the Enforcement Directorate.
PNB said its liability is contingent only. The liability shall be decided based on the law of land.
Powered by Capital Market - Live News
Disclaimer: No Business Standard Journalist was involved in creation of this content