PNB Fraud: Nirav Modi virus spreads rapidly, nationwide ED raids yield Rs 5.1k cr assets

The great Indian banking robbery, reported on Wednesday by Punjab National Bank (PNB), is getting murkier by the day. It has now come to light that six Indian banks have together sanctioned around Rs 10,560 crore to be credited to PNB's nostro accounts.

A foreign bank is also believed to have built an exposure to the fraudulent transactions of PNB extended to the diamond merchant Nirav Modi and his associates.

Nostro account is the foreign currency account held in the overseas branch of another bank.

More skeletons are likely to be tumbled out as the probe intensifies. So far, banks which had paid up on PNB's fraudulent guarantees include State Bank of India (SBI), Bank of India, Axis Bank, Canara Bank, Union Bank of India and Allahabad Bank. Sources said while SBI made a payment of Rs 960 crore towards letters of undertaking (LoUs), Bank of India's exposure stood at Rs 1,500 crore and Canara Bank's Rs 1,400 crore. Both Union Bank of India and Allahabad Bank made a payment of Rs 2,200 crore each. Axis Bank, which had an exposure of Rs 2,300 crore, issued a statement on Thursday saying it has sold its exposure in the secondary market.

State-owned PNB on February 14 said it has detected a mega scam worth $1.77 billion (around Rs 11,300 crore) where billionaire jeweller Nirav Modi allegedly acquired fraudulent LoUs from a branch in Mumbai to secure overseas credit from other Indian lenders.

A senior SBI official said, "We have released about Rs 960 crore to the nostro account of PNB when LoUs issued by the bank were presented at our overseas branch."

Other bank officials said they are confident of getting back the money from PNB. A senior banker said, "All the money will come back to the respective banks as we all have sanctioned the credit to the nostro account of PNB. Our sanction is against the PNB guarantee and banks have to undertake detailed examination of clients they guarantee."

"These amounts are then credited to the LoU isuing bank's nostro accounts. Axis Bank has in the past undertaken such transactions with PNB against their authenticated SWIFT LoUs," it said in a regulatory filing. SWIFT is a software to perform such transactions.

Meanwhile, Sunil Mehta, chairman PNB, said in a press conference, "All bonafide liabilities will be paid once the investigative agencies complete their work."

Another senior banker said, "PNB can delay the payments to us but in the end, they will have to make the payments as the money is gone out of the system once the letter of undertaking lands in the hands of the client. He comes with urgent financing requirements so all LoUs were credited from the nostro account of PNB."

Axis Bank said it sold down its dealings with PNB in a regulatory filing without mentioning the size of its exposure. The bank said it is an active participant in the secondary market for transactions against the (LoUs) and it "sold down" certain such dealings with PNB saying that in the normal course of business, the bank undertakes such transactions against letters of undertakings issued by other banks through its overseas branches.