India’s biggest banking scam has happened in the Punjab National Bank. The scam is more than Rs. 11000 crores. In this scandal, the name of businessman Neerav Modi has emerged. After
the scam came to light, PNB also suspended 10 officials. PNB said on Thursday that the scam was going on since 2011. It was known in the third week of January this year.
Typically, at least two employees in any bank authorize the transaction. According to media reports, in this case, when Nirav Modi and his colleagues came to the letter of undertaking in PNB, PNB employees issued them the LOU. Under the rule PNB should have entered this LOU in the bank’s book i.e. the bank should have registered in the core banking system. But the employees did not do this.
What is Letter or Undertaking ie LoO
Letter of Undertaking is issued by any international bank or international branch of any Indian bank. On the basis of this letter, the banks provide short term loans of 90 to 180 days to the companies. Based on this letter, any company can withdraw funds in any part of the world. It is used mostly by importing companies for overseas payments. Letter of undertaking is given to any company on the basis of the Letter of Comfort. Letter of Comfort Company is issued by the local bank.
Employees issued Coded messages to another bank in Swift format. At the same time, the party has issued an electronic message for itself. After the release, the information of these LOUs was sent to SWIFT code messaging all over the place. These LOUs have been redeemed by Nirav Modi from different government and private bank branches abroad. The amount of the discount was about Rs. 11000 crores.
According to the rules, a party should have seen its limit before issuing LOU. Neerav Modi had no limit in this case. When an employee of PNB retired and a second employee came in, he saw that the party was issuing a LOU without a limit.
