Some bankers are skeptical of the audits carried out in the industry as there is no centralised system in place for the jewellery industry, and the current IT infrastructure is not up to the mark
The state-owned PNB has been defrauded of over USD 2 billion by fraudulent use of Letters of Undertaking (LoUs) allegedly by Nirav Modi and his associates.
In an effort to tighten the noose around loan defaulters, ministry of finance has written to all banks to start bifurcating non-performing assets as either wilful default or fraud. Banks have also been asked to prepare a list of loan defaulters for “naming and shaming” in public.
Goods worth nearly Rs 890 crore, involving customs duty of around Rs 52 crore, may have been diverted by the SEZ-based units of the Nirav Modi Group to the domestic market.
The general consensus among industry bodies is that RBI could have tightened the existing regulations on LoUs rather than imposing a blanket ban on them.
Choksi had earlier written a similar letter to CBI, in which he had said that he was facing threats from people who he had business relations with.
"Our credit appraisal system is a problem. Hence the risk framework is the need of the hour," Chakrabarty said.
Foreign branches of Indian banks, which are already witnessing some decline in business and increased borrowing costs will also be hurt, said a report by SBI's economic research wing.
The CBI alleged that firms controlled by Modi and Choksi obtained fraudulent LoUs and letters of credit (LCs), worth over 13,000 crore, from PNB in connivance with some officials of the bank.
The Mumbai branch of Punjab National Bank had issued as many as 1,213 letters of undertaking (LoUs) fraudulently for the group of companies belonging to Nirav Modi since March 2011.
Earlier this week, the Reserve Bank has stopped banks from issuing LoUs and Letters of Comfort for trade finance for imports into the country.
In a FIR filed with BS&FC, two LoUs were issued by PNB employees Gokulnath Shetty and Hemant Kharat, who were also named in the complaint filed against Nirav Modi’s companies, to Chandri Papers and Allied Products worth Rs 9,000 crore.
The agency had yesterday informed the court it had added 'criminal breach of trust' charge to the case related to diamond trader Mehul Choksi's firms.
Almost 26 banks, including PNB, had sanctioned credit limits to Nirav Modi's companies, and the total amount may swell to Rs 3,000 crore
Among others, the agency has arrested Gokulnath Shetty, the then deputy manager (now retired) of PNB, in connection with issuance of fraudulent letters of undertaking (LoUs) to Choksi-owned firms.
Letters of Credit and Bank Guarantees for Trade Credits for imports into India may continue to be issued subject to compliance with RBI provisions
The International Monetary Fund has said banking reforms like insolvency code and recapitalisation will be ineffective unless governance standards are improved.
The list includes international branches of Indian banks and some foreign banks.
The RBI has ALSO asked all banks for details of the LoUs they had written.
the level of noise may be justified, but it could cause a huge loss of confidence, Assocham Secretary General D S Rawat said.
The UPA government had selected 13 companies in 2013 to import gold and sell in the domestic markets. These companies sold the gold at premium prices.
Kolkata-based lender Bandhan Bank will be raising up to about Rs 4,473.75 crore from the public through sale of 11.93 crore equity shares
Both equity and bond markets are jittery with banks fraud expanding and banks hitting the brakes. Strong and visible action is the only way out of the current mess.
A $2 billion fraud at India's second-biggest state-run lender Punjab National Bank has shaken the nation's financial sector, triggering a massive probe and regulatory changes.
Mehul Choksi, one of the prime accused in the alleged fraud at Punjab National Bank, has written to the CBI, expressing his inability to return to India to face charges.