PNB fraud: Other banks may have to share scam burden

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PNB fraudThe Banks, who gave away money to jewellers Nirav Modi and Mehul Choksi on the basis of fraudulent guarantees issued by Punjab National Bank, will have to bear and share the liability if they were found  guilty of not following norms, a government official has revealed.

Speaking to a leading media organization on condition of anonymity, a senior finance ministry official said: “For now PNB will honour all commitments as and when they arise, but if the investigations reveal that there was impropriety on the part of other lenders they will have to share half the burden.”

As many as 30 banks, including some foreign lenders, are believed to have paid out funds to Modi, Choksi and their companies based on fraudulent letters of undertaking (LoUs) they allegedly made in collusion with PNB employees, according to a parliamentary committee.

PNB’s exposure in the scam is estimated at Rs 12,700 crore.

“We don’t think there is any confusion on the payments. PNB has already committed to honour all bonafide LoUs,” the official said, adding that all public sector banks have already agreed to give a commitment to PNB that if the investigations reveal there has been some slippage on their end they will share the burden.

“The government will support all state-run lenders and for now we don’t see that the payments on behalf of those Lo-Us will endanger the bank (PNB),” he said.

The official also said whatever dispensation is allowed under the existing rules, PNB would get the same.

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