After discovering the Possibility of Fraud in one of its Branch Punjab National Bank (PNB) has written a letter to MD, Chairman and CEOs of all scheduled banks about the Modus-Operandi of Suspected Fraud. Text of the letter is as follows :-


Reg: Modus-Operandi of Suspected Fraud in one of our branches

It has been reported through a preliminary investigation that the suspected fraud has been carried out by the perpetrators in collusion with the staff at one of our branches in Mumbai. Apparently, the modus operandi adopted was as under:

i, It was found through SWIFT trail that one junior level branch official unauthorisedly and fraudulently issued Letters of Undertakings (LOUs) on behalf of some companies belonging to Nirav Modi Group viz. Solar Exports, Steller Diamonds and Diamond R Us for availing buyers’ Credit from overseas branches of Indian Banks. The companies were maintaining only current accounts with the branch and were not enjoying any fund/non fund based limits, None of the transactions were routed through the CBS system, thus avoiding early detection of fraudulent activity.

ii. Similar modus operandi was used by the same branch official in companies belonging to M/s. Gitanjali Gems Ltd, promoted by Mr. Mehul Choksi viz. Gitanjali Gems, Gili India and Nakshatra, issuing LOUs/PLCs. These companies enjoy credit (FB NFB) facilities. In case of FLCs, it has been found out that at the time of issuing FLC for a smaller amount by SWIFT, the transaction was routed through the CBS system but subsequently, amendments were made in these FLCs by substantially enhancing the amount of FLC and transmitted through SWIFT without routing these enhancements through CBS. The said official would subsequently convey via SWIFT the acceptance of Bills for the full amount of FLC to the overseas negotiating bank. The detailed investigation is still in progress.

iii. LOUs were opened in favour of overseas branches of Indian Banks for import of pearls for a period of one year, for which as per RBI guidelines, the total time period allowed is 90 days from the date of shipment. This stipulation was overlooked by overseas branches of Indian Banks, who are also required to follow RBI guidelines. There is clear criminal connivance of group companies of Sh. Nirav Modi and GlitanjaIi Gems with our branch official and also apparently, with officials of overseas branches of Indian banks.

iv. None of the overseas branches of India based Banks have shared with us any document/ information made available to them by these Indian companies at the time of availing buyers’ credit from them.

v. The Buyer’s Credit availed against fraudulent LOU was used either to retire import bills or replenish the maturing Buyer’s credit of some other Banks,

vi. The fraudulent acts were found out when subsequent to superannuation of the said branch official, these companies again approached our branch for availing LOUs. On being asked to provide 110% margin because of no sanction of any FB/NFB limit, the companies informed the branch that they have been undertaking such transactions for last so many years.

vii. This information is being shared strictly for exercising necessary caution in the matter.

Download Caution Notice issued by PNB

Also Read-

No instructed PNB to meet its commitments under LOU: RBI

PNB clarifies on alleged Scam by Nirav Modi and Gitanjali group

Steps initiated by ICAI on Punjab National Bank Matter

The Punjab National Bank (PNB) Fraud

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10 responses to “PNB issue Caution Notice in Suspected Fraud case; Discloses Modus-Operandi of Suspected Fraud”

  1. A L Chaudhary says:

    What has happened in PNB cannot take place with
    out active participation, commission/commissions ns of senior management, auditors. Banks know that all losses finally will be funded by taxpayers. If we stop funding banks losses through govt banking frauds and NPA will stop.


    There are controls in SWIFT system which is inbuilt after the collapse of Barings Bank in past for averting such situation.


    There are many ways of committing such frauds on the system.
    One was Advance remittance
    Second was providing Export credit on Accommodation LCs issued by the fraudulent importers.
    Third was the method used by these groups.
    Who was internal auditors
    Who was external auditions
    Who provided the secret codes to the message
    Who prepared, checked, authenticated and controlled
    What was the role played by ZO/HO
    Whenever the imports bills received how the payment was made
    If not then how foreign banks met the obligation
    Who did inspection of foreign branches from respective banks and RBI
    Who checked the inspection reports or concurrent auditors notes
    There are many.
    These indicate collusion at all levels.
    Think over.
    I had reported to RBI in 2015 about such frauds when a fraud of Rs 600 crore was reported for BOB and OB C but nobody appear to have taken a cognizance of it.

  4. suresh kumar says:

    If it is fraud ,then fraud committed by bank or fraud committed by using loopholes in the system by a person or a group of person.

  5. suresh kumar says:

    If any think not in books or on records how a person can trace and if he can than what is he procedure to handle this type of the situation.

    situation 2 whether it is fraud or is a contingent liability which is payable on due explain for my academic knowledge.

  6. Madhusudan says:

    It is contingent liabilities not recorded in CBS. It would have traced if it was recorded in CBS


    Similar is the modus-operandi adopted by the banks for clearing the NPAs of the defaulting company by opening dummy LC’s in favour of the dummy suppliers and goods is shown purchased without receiving the goods and thereafter receiving company issuing dummy sales invoices to regularize the transactions. Thus with the connivance with the defaulter lender/borrowers banks are looting the public money. This corrupt practice is to be examined.

  8. ravi chandiran s says:

    In Pondicherry also these type of forex transactions are bogusly done by lots but the Bank officials have not verifying the Company’s BalanceSheet with ROC and there is no control measures or confirming the accuracy of Stocks held by the Companies. Even for the forex receipts also the correctness of the bills shown against them are not properly verified by the Banks. Ultimately Govt. is pressuraizing for the Digitialisation but there are various loop holes are in the Banking system which will be very well known by the Bank officials which shows utter failure in the Controlling Channels.

  9. A K Srivastava says:

    Most of the companies 99% taking out bank money through bogus expenses bills, submission of fake debtors and stock list, but bank managers taken money and keep quiet. I had fool proof cases of many banks, but nobody is taking action except loot of public money through banks. The total amount is so huge that a cointry can run in it.

    If stock verification and debtors list will made be mandatory to have confirmation from counter party for bank stock statements, the 50% amount will be caught.

  10. how the concurrent, internal and statutory, roc, legal and tax complaisance are being managed legally over past periods,years. PNB does not have any other option than regularize the democratic practice looking to impact on public finance and bank survival

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