Punjab National Bank (PNB), the country's second-largest lender on Wednesday said that it has detected "fraudulent and unauthorised" transactions worth more than Rs 11,360 crore at one of its branches in Mumbai.
The bank said in a regulatory filing the transactions were "for the benefit of a few select account holders with their apparent connivance" and that "based on these transactions other banks appear to have advanced money to these customers abroad."
The bank informed the stock exchanges on Wednesday that the fraud was detected in one of its branches in Mumbai and that it has referred the matter to law enforcement agencies.
Last week, the Central Bureau of Investigation (CBI) had booked billionaire jeweller Modi, his wife, brother and partners for allegedly cheating PNB of Rs 280.7 crore, following a complaint by the lender that alleged that these people conspired with some of its own officials, causing the bank "wrongful loss”.
"Based on these transactions other banks appear to have advanced money to these customers abroad," said Punjab National Bank.
PNB did not mention the impact the fraud may have on its financials. "These transactions are contingent in nature and liability arising out of these on the Bank shall be decided based on the law and genuineness of underlying transactions. The quantum of such transactions is $1771.69 million (approx). The matter is already referred to law enforcement agencies to examine and book the culprits as per law of the land," PNB noted.
PNB also suspended its ten officials, including a branch Deputy Manager for this fraud.
The bank said in its complaint that a deputy manager, Gokulnath Shetty, who was posted in the bank’s foreign exchange department in Mumbai since 31 March 2010, along with another official Manoj Kharat had fraudulently issued letters of undertakings (LoUs) to these firms without following prescribed procedure and without making entries in the banking system, avoiding detection of transactions.
This has now opened up the bank to potential claims by other banks.
While Rs 280 crore is the amount of LoUs that have devolved, the remaining is the potential liability that the bank will face in the next one year, said a person familiar with the development.
The bank's stock took a hit after it announced the detection the fraud. PNB shares were trading 9.6 per cent lower than yesterday's closing at 3.15 pm on the Bombay Stock Exchange.