Punjab National Bank (PNB) has been under the scanner after it was discovered that bank officials colluded with Nirav Modi and Mehul Choksi and issued LoUs to their firms using SWIFT without recording the transactions in the bank’s books. Photo: Pradeep Gaur/Mint
New Delhi: The Punjab National Bank (PNB) board met on Monday and pushed for stricter compliance with all systems and procedures in the aftermath of the Rs11,400 crore fraud involving jewellers Nirav Modi and Mehul Choksi.
The board also stressed on the need for greater focus on recovery in accounts that have turned non-performing, a person familiar with the development said on the condition of anonymity.
The Delhi-based bank has been under the scanner for operational lapses after it was discovered that officials of the bank colluded with Modi and Choksi and issued letters of undertaking to firms of the two jewellers using the SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging system, without recording the transactions in the bank’s books.
These firms then used the letters of undertaking (LoUs) to borrow from international branches of other banks.
The fact that this was happening since as far back as 2011 raised questions about the lapses in the bank’s monitoring processes. It also raised concerns about the bank’s HR policies after it emerged that one of the accused bank officials had not been transferred for 7 years.
Last week, finance Minister Arun Jaitley criticized the role of auditors and the top management of the bank for their failure to detect the scam. Further, he indirectly criticized the failure of the Reserve Bank of India for the lapses in regulatory oversight.
Investigating agencies are questioning bank officials, including the executive director and general managers. Following the scam, the Reserve Bank of India has ordered all banks to integrate their SWIFT messaging system with the core banking system by April end.
Punjab National Bank has also issued operational guidelines to its branches to ensure checks at multiple levels and strict implementation of the transfer policy.
