Search Share Prices
India's PNB hit by $1.8bn worth of fraudulent operations
India's Punjab National Bank (PNB) has uncovered a $1.8bn fraud that benefited a small group of customers and could affect other banks.
Investigators said the scam, which has been going on since 2011, was perpetrated by a wealthy jeweller who reportedly used fake bank documents to obtain loans overseas.
The bank has released a statement on Wednesday saying "the fraudulent and unauthorized transactions" were discovered in January at a single Mumbai branch "for the benefit of a few select account holders with their apparent connivance."
"The bank will honor all its bona fide commitments," said the PNB.
The value of the fraudulent transactions equates to nearly a third of Punjab National Bank's (PNB) market value, and is 50 times more than its profits for the final quarter of 2017.
The finance ministry has warned all Indian banks to review their large customer exposures. The scam's impact may extend to other banks, which could hurt confidence towards India's banking sector.
According to Indian media, the scam's chief architect is billionaire jeweller Nirav Modi, although authorities have not accused him publicly. Even so, he is under investigation for allegedly cheating PNB of $43m through the use of fake bank letters to get loans.
According to the Press Trust of India, Modi and his family left the country in early January before the scam was revealed.
PNB has filed suits against three companies: Solar Exports, Stellar Diamonds and Diamond R US (that is said to belong to Nirav Modi).
It also named Gitanjali Gems, Gili India and Nakshatra: companies promoted by another jeweller, Mehul Choksi, Modi's uncle.
PNB has said Nirav Modi has written to the bank but still hasn't offered a way of payment.