Saturday, 15 December, 2018

RBI Clamps Down On Credit Guarantees As PNB Fraud Swells

Watchdog scraps PNB scam tool Nirav Modi impact: RBI scraps letters of undertaking for import trade credits
Orlando Vargas | 14 March, 2018, 10:48

This comes after the CBI on Feb 14 received complaints from PNB, which detected a Rs 11,292 crore fraud involving billionaire diamond merchant Nirav Modi.

The RBI also scrapped the Letter of Comfort as it attempts to plug a loophole and improve banks' due diligence in trade credit.

"Letters of credit and bank guarantees for trade credits may continue to be issued subject to compliance with the regulations". However, letters of credit and bank guarantees will continue upon meeting certain conditions, the central bank said in a press statement.

"LoUs and LoCs don't come under a normal credit sanction".

The PNB scam by diamantaire Nirav Modi and his uncle Mehul Choksi involved using LoUs issued in favour of the accused by bank employees who misused their access to PNB's SWIFT - the electronic messaging system used for overseas funds transfers.

Gokulnath Shetty, former PNB staffer, and Mehul Choksi, the absconding promoter of Gitanjali Gems, could be in prison for life if found guilty after a special court on Tuesday allowed CBI to incorporate Section 409 in the second FIR filed by the agency.

Logjam continue in Parliament for 7th consecutive day
We request all the parties to let the house function and hold constructive discussions", the Minister said. The government, he said, was ready to discuss any issue, but since the proceedings remained disrupted.


Advisor to Delhi CM Arvind Kejriwal resigns
Sisodia said: "They don't want to find a solution". "Mr Sisodia said the BJP could resolve the issue immediately if it wanted to". His tweet said, "Due to the fake fights and the collusion between BJP and AAP, traders are facing a lot of damage".


RS Polls: Owaisi to support TRS
The maximum number of candidates fielded by the Congress party are in Karnataka, with 3 nominations, namely Dalit poet L. Three nominated members - actor Rekha, cricketer Sachin Tendulkar and social worker Anu Aga - will also retire then.


A lawyer for Choksi said he was unaware of the new allegations and declined to comment.

PNB had previously pegged its exposure to the Gitanjali companies at Rs 6,138 crore.

Fugitive jeweller Nirav Modi obtained his first fraudulent guarantee from PNB's Brady House branch in Mumbai on March 10, 2011 and managed to get 1,212 more such guarantees over the next 74 months, Finance Minister Arun Jaitley said.

"Though this decision will hit Indian importers and jewellery businesses in the short term, it will definitely help bring down the possibility of bank fraud in the long term", a senior official said Wednesday. Banks have been increasingly finding it hard to trace persons who dupe them and flee the country.

Another said that, although they were hopeful of arriving at an "amicable solution" on who takes the liability, but added it would likely need intervention by India's central bank and the government. Banks charge a fee from the importer for the LoU.

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