PNB fraud: The Reserve Bank of India has discontinued Letters of Undertaking (LoUs)
The Reserve Bank of India has discontinued Letters of Undertaking (LoUs) or guarantees for overseas credit after the Punjab National Bank (PNB) fraud.
The LoU credit is ideally meant for short-term only. In the Nirav Modi-Mehil Choksi case, the term of loan was allegedly extended far beyond what is prescribed as per the rule book.
Even PNB and other lenders are slugging out over the loan term, which should not have been extended, says PNB, longer than 90 days.
CommentsPNB has told police that it has also uncovered additional exposure of about Rs 9.42 billion in connection with a massive fraud, according to a court filing.
PNB last month said it had been defrauded of about Rs 12,600 crore by two jewellery groups who raised credit from overseas banks based on fraudulent guarantees issued in collusion with rogue PNB staff.