Will take all possible action against guilty: PNB

Hopeful of part recovery of loan, says PNB chief

The Punjab National Bank (PNB) on Thursday said it will take all possible action against the wrongdoers in the Rs 11,400-crore Nirav Modi fraud case, which started in 2011.

PNB has suspended 10 officers over the scam and referred the matter to the CBI for investigations. The Enforcement Directorate is continuing raids at various places associated with the well-known jewellery designer Nirav Modi.

CEO Sunil Mehta, during a press briefing, did not rule out its contagion impact on lenders but said he was hopeful of partial recovery of the loan from the diamond merchant's companies.

Mehta said a few foreign branches of Indian banks were involved in the fraudulent transaction and that all of them have been informed about it.

"We have already initiated the process. The Enforcement Directorate is also seizing the properties, seizing the current assets and we hope we will be able to recover a good amount," Mehta said.

"In the last 123 years, we have seen many ups and down. The bank in its full capacity will take every action to book wrongdoers," he said.

"This fraud had started in 2011. Our own bank detected it first and told the law enforcement agencies about it. The PNB is fully committed to its clean banking policy. That is why we are the first one to detect and report this to the various law enforcement agencies," Mehta said.

The PNB has written to the chiefs of 30 other banks cautioning them about the modus operandi of the fraud.

Seven years old

Mehta said the fraud was going on since 2011 but came to light only on January 25 through internal detection.

To a question on why it took the bank 7 years to detect a fraud of this magnitude, Mehta said the transactions were never entered in the core banking system (CBS), which processes daily banking transactions.

He said the bank will conduct a forensic audit in the case if need be.

In this case, it was found through SWIFT trail that one unauthorised junior-level official fraudulently issued Letters of Undertaking on behalf of some companies belonging to Nirav Modi Group.

SWIFT is the Society for Worldwide Interbank Financial Telecommunication.

It is a global financial messaging service used to transfer millions of dollars internationally. SWIFT was used to bypass the CBS, which processes daily banking transactions.

'Standalone incident'

Mehta tried to assure stakeholders saying that it was a standalone incident confined to a single branch in Mumbai. He also said all other branches of the bank have been scanned to check any fraudulent activity.

He also said the bank has informed all the lenders about the case.

"We have issued an advisory as well to them (lenders). We were the first to inform the Securities and Exchange Board of India about this under the disclosure norms. So, all these things are as per our clean banking agenda," Mehta said.

He further said the government was monitoring the case on a day-to-day basis. "The bank has the capability and capacity to come out of this situation."

Stating that the fraud was a "cancer" the bank was in the process of curing, Mehta said the bank will honour all its commitment.

"If the investigation finds that it is solely our liability, we will accept it," he said. Mehta further said the bank will honour all its bonafide commitments.

PNB shares continued to bleed for the second day in a row, ending with a steep loss of 12% at Rs 128.35 apiece on BSE.

The PNB chief said that though the firms involved in the fraud have offered to pay the loan back but that the offer is too vague to believe.

The PNB is India's second-largest state-owned bank with an assest base of Rs 7.8 lakh crore.

The top PNB official, however, refrained from providing details as the investigations were going on.

He asserted that action will be taken against all those involved, irrespective of their seniority.