BUSINESS
The defrauded bank will trip overseas credit business of Indian lenders by delaying payments on LoUs, they say
Senior executives of Indian banks will warn Reserve Bank of India (RBI) of the international ramifications and the possibility of overseas regulators stepping in if Punjab National Bank (PNB) does not honour its repayment commitments related to fraudulent letters of undertaking (LoU) worth Rs 11,300 crore issued to diamantaire Nirav Modi and his associates.
Not in any mood to soften their stance as they approach RBI this week to seek clarity on PNB paying up, the executives will tell RBI that the domestic lenders run the risk of losing their credibility in the international credit markets if the financial instruments like LoUs are not respected.
There will be a ripple-down effect on Indian financial institutions with overseas credit institutions refusing to do business with Indian lenders, they will tell the central bank in a meeting scheduled this week.
Overseas branches of banks had credited Rs 11,300 crore to the Nostro account of PNB. The issue came to the fore when PNB refused to honour the first LoU of Rs 2,200 crore, which fell due on January 24, 2018, to Allahabad Bank. The 147 LoUs, issued by PNB, starting March 2017, will mature by March 2018.
The chairman of a leading public sector bank said, "We will apprise the RBI how the Indian banks will be discredited in the overseas markets if PNB does not honour its commitments. The credit system, built entirely on trust, will collapse. The payments were undertaken by overseas branches of Indian banks, which are also governed by overseas regulators. If guarantees in overseas markets are dishonoured, the foreign regulators may also step in. Being a government bank, a guarantee issued by PNB is equivalent to a sovereign guarantee."
Domestic banks will meet N S Vishwanathan, deputy governor of RBI in charge of financial sector regulations, early in the week.
Adopting a rigid stand, the PNB management led by its chairman and managing director Sunil Mehta has said that the responsibility lies with the other banks as well to check with the originating bank about the veracity of its guarantees and keep a track on what purpose the money was utilised. Bankers, however, told PNB that guarantees are irrevocable instruments issued on faith.
Mehta, who interacted with bankers via video-conferencing on Saturday, said that banks supplying the cash on the LoUs should have checked with the originating bank on the veracity of the undertaking and also checked the end use of the funds that they released.
The other banks, however, strongly differ on this issue.
A senior banker who attended the meeting said, "We have released money to the Nostro account of PNB, and not to any unknown client. In this transaction, PNB stood guarantor to its clients Modi and his maternal uncle Mehul Choksi (promoter of Gitanjali Group). To fund these clients, PNB issued 143 LoUs in 63 days starting March 1, 2017. All of these are set to mature this March."
Meanwhile, bankers have recalled loans worth Rs 10,000 crore issued to the Nirav Modi group and the Gitanjali group of companies, and recovery procedures are being implemented, a banker said.
"We asked the PNB management when the money went out of the core banking system of the bank, why was there no alarm," the banker said. PNB management wants to delay payments, saying investigations are underway.
‘Against the principles of…’: Vijay-led TVK passes resolution against One Nation One Election
Watch: Two Delhi traffic police personnel dragged for 20 metres, case filed
Delhi-NCR pollution: Targeted measures enforced under GRAP for 16 days from...
AUS vs PAK Live Streaming: When and where to watch Australia vs Pakistan 1st ODI in India?
'No justification for..' J-K CM Omar Abdullah reacts to Srinagar terrorist attack
Who is Sunil Lulla, on whom Sebi imposed Rs 5000000 fine for violating market norms?
This bank's UPI services will NOT work for two days in November due to...; check details
Shah Rukh Khan spotted wearing one of the most expensive watches in the world, it costs Rs...
Delhi Pollution: National capital's PM 2.5 Levels 13% higher than previous Diwali, reports suggest
J-K: Five injured after terrorists attack Srinagar weekly market with grenades
Mukesh Ambani's Reliance earns Rs 15393 crore during festive season, market cap reaches Rs...
This city that gives maximum number of IAS officers, its not Mumbai, Kolkata, the UPSC hub is...
Priyanka Gandhi Vadra's emotional message for people of Wayanad: 'When my brother was facing...'
Margot Robbie welcomes baby boy with husband Tom Ackerley
How can India qualify for WTC final after humiliating whitewash against New Zealand
Deepika Padukone-Ranveer Singh's baby girl has Sania Mirza connect, Bollywood couple reveals....
Bigg Boss 18: THIS actor replaces Salman Khan, to host reality show for...
WTC 2023-25 points table update after New Zealand's historic Test series win over India
IND vs NZ test: India lose against New Zealand by 25 runs, lost test series at home after…
'Vibe hai': Indonesian siblings 'Dilbar' rendition leaves Big Boss fame amazed
IND vs NZ test: Recap of BGT? Rishabh Pant last hope as India close to whitewash at home after...
Rajpal Yadav loses his cool, snatches journalist's phone, SHOCKING video goes viral
Warch: Land Rover bitten by Hippo, tourists witness intense faceoff as..., video goes viral
Fake IPS officer's epic dance to Bhojpuri song takes internet by storm, watch viral video
WI vs ENG: Shai Hope goes past Babar Azam, Virat Kohli in elite list with 17th ODI century
'If he doesn't resign...': Mumbai police receives threat call for UP CM Yogi Adityanath
IPL 2025: KKR CEO reveals reason that led to Shreyas Iyer's exit from franchise
HM Amit Shah releases BJP's 'Sankalp Patra' for Jharkhand assembly polls
Aishwarya Rai Bachchan recalls when she was announced Miss World 1994: 'We had rehearsals for...'
Drunk UP man call police over 250 grams missing potatoes, demands...,WATCH
Kartik Aaryan says somebody scratched him on the sets of Bhool Bhulaiyaa 3, he asks ‘if it was…’
Kiran Rao says Aamir Khan knows 'nothing' about son Azad's school: 'When we were married, I was...'
Trouble for Anil Ambani: SEBI issues demand notice of Rs 1540000000 over...
Nvidia to replace rival Intel in Dow Jones indices by November 8
Isha Ambani Vs Eiesha Bharti Pasricha: Know their net worth, college, academic qualifications
Salman Khan remembers designer Rohit Bal, says...
Bigg Boss 18: Salman Khan's Weekend Ka Vaar timing changed, details inside
Bhai Dooj 2024: Date, shubh muhurat, timings, rituals, significance
Delhi AQI touches 400: Many times over WHO limit, pollution in 'severe' category
Aishwarya Rai Bachchan says she rejected Shah Rukh Khan's film because Abhishek Bachchan wasn't...
Four children among six injured in attack on Gaza vaccination centre
IIT students launch dustbin in air using firecracker, WATCH viral video
Happy Bhai Dooj 2024: Top 50 wishes, What'sApp messages, quotes to share with your loved ones
IND vs NZ: Shubman Gill surpasses Cheteshwar Pujara in elite WTC list led by Rohit Sharma
DNA TV Show: Hindus in Bangladesh unite against fundamentalism
‘Another example of…’: MEA on Canada labelling India ‘cyber adversary’
'Bhai kyu jhooti tassali....': Mrunal Thakur criticizes fan who photoshopped her in Diwali pic
Mukesh Ambani, Anil Ambani set to earn money from Singham Again's box office collection, here’s how
Adani Power cuts Bangladesh electricity supply by half due to $846 million unpaid bills
Here's what is happening inside Ratan Tata’s Bombay House since after death of business magnate
Virat Kohli dispels retirement rumours, suggests he may continue playing cricket till....
Meet man, highest UPSC exam scorer, who broke IAS Tina Dabi's record, he is...
Swati Maliwal pours bottle of polluted water outside Delhi CM Atishi’s residence; WATCH
IPL 2025: R Ashwin tops CSK's wishlist as franchise plans to utilize RTM for THIS New Zealand star
'Abki baar...': AI imagines Donald Trump, Kamala Harris as Indian politicians, netizens react, WATCH
Amid bomb threats, ammunition cartridges found in Dubai-Delhi Air India flight