The Reserve Bank of India (RBI) logo is displayed at the entrance to the bank’s headquarters in Mumbai (Photographer: Kainaz Amaria/Bloomberg)

RBI Denies Asking PNB To Repay Other Banks In Nirav Modi Fraud Case

The Reserve Bank of India denied giving any instructions to the Punjab National Bank to repay other lenders which had exposure to the alleged Rs 11,400 crore fraud case against billionnaire jeweller Nirav Modi and firms linked to him.

“There have been reports in the media that in the wake of fraud involving a sum of $1.77 billion that has surfaced in Punjab National Bank, the Reserve Bank of India has directed PNB to meet its commitments under the Letter of Undertaking to other banks,” the central bank said in a media statement on its website. “RBI denies having given any such instructions.”

India’s second-largest state-owned lender on Wednesday said it had detected a $1.8-billion fraud at one of its branches in Mumbai. Modi allegedly colluded with two bank officials to obtain fraudulent guarantees to get short-term credit worth over Rs 11,000 crore without the bank knowing.

Later, it was revealed that other lenders including the State Bank of India, Allahabad Bank, Union Bank, Axis Bank and Bank of Baroda, had either a direct or an indirect exposure to the case.

RBI has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action.
RBI Media Statement

RBI noted that the fraud in PNB is a “case of operational risk” which arose due to errant behaviour of one or more bank employees. It said that was a “failure of internal controls”.