The bank's top management spoke about how they uncovered the fraud and the steps it has taken to "punish the culprits", reiterating their resolve for clean banking.
The top management of Punjab National Bank (PNB) on Thursday said that the bank has taken strong action after uncovering the fraud, is committed to clean banking and that it will honour its bonafide commitments.
The bank said that it has initiated the recovery process in the fraud case and is hoping to recover a good portion of the amount.
Sunil Mehta, Managing Director (MD) and Chief Executive Officer (CEO) of PNB said, "This (the fraud) started in 2011. The bank itself detected on the January 25 and (it) was reported to the regulators, including the Securities and Exchange Board of India (SEBI) and law enforcement agencies to book the culprits and take strong legal action."
The bank may conduct forensic audit if the need arises and it will follow regulator's instructions on repayment of other banks, MD and CEO Mehta said.
The management said that the fraud was detected when the customer came for Letter of Undertaking (LoU) renewal on January 25, reiterating that this is a standalone incident that took place in one of its branches.
They also added that the bank will take full responsibility if the investigation places the onus on it.
Mehta said that foreign branches of Indian banks were mainly involved in the fraud.
"The bank is committed to clean banking. We are the first one to detect and inform it to agencies. All members in the banking sectors have been informed and have been given advisory from us," Mehta said.
Mehta added that "The bank has the capability and capacity to come out of this situation," adding that "attempts are being made to protect the bank's financial interests".
The bank's MD and CEO also said that a complaint has been filed against PNB's deputy manager, Gokulnath Shetty and other staff members too.
Calling it a "cancer", Mehta said that it needs to be detected and done away with, adding that the bank is "committed to pursue clean and responsive banking. PNB is confident of clean banking. We will resolve it and will honour all our bonafide commitments".
The top management reiterated that PNB is a 123-year-old bank and has seen many ups and downs, adding that it is the second largest lender in the country and will come out of this.
PNB is witnessing probably one of the biggest scams in banking history, opening a can of worms worth over Rs 11,300 crore (USD 1.77 billion).
Fraudulent transactions likely to have been going on for the last seven years were unearthed by PNB -- the second largest public sector bank and fourth largest lender by assets – at one of its Mumbai branches.
Foreign branches of at least two Indian banks, including Axis Bank and Allahabad Bank, are likely to have been caught in the fraud with an alleged credit offering given based on letters of undertaking (LOUs) issued by PNB allegedly towards group companies of Nirav Modi and Gitanjali Gems.
These banks are said to have recalled the loans given based on the LoUs/FLCs (foreign letters of credit) issued on behalf of group companies of Gitanjali Gems — Gitanjali Gems, Gili India, Nakshatra — and to Nirav Modi Group firms, which include Solar Exports, Stellar Diamonds & Diamonds DU.
The bank's management said that Nirav Modi, the accused, has written to the bank about a repayment plan but that the bank has requested Nirav Modi to meet and submit a written plan.The state-owned lender is also expected to hold a conference call later in the day.